Beyond Remittances

Nepal’s economic track remains constrained by a growth model that has been overly dependent on remittances and consumption. Though remittances have uplifted millions of people out of extreme poverty, this model has failed to generate effective job or productivity enhancement. The latest economic assessment made by the World Bank shows the harsh reality of Nepal’s economy, which is resilient but stagnating. Due to structural inefficiencies and policy inertia, the economy is unable to reach its full potential. Remittance inflows have caused deeper economic vulnerabilities for decades. Most of the young workers migrate in search of better opportunities and the domestic labour force continues to shrink, limiting the country’s ability to develop robust industries. 

The external earnings have sustained consumption but have not translated into productive investments that lead to long-term economic prosperity. As Nepal’s economic growth rate is trailing behind most South Asian nations, it is clear that the current method is unsustainable. The country must pursue fundamental economic reforms. The government should focus on increasing export competitiveness and strengthening domestic job markets. Without the proactive measures, the country risks deepening its dependence on external labour markets and fails to create employment opportunities at home. To minimise the dependence on external labour, reforms should be made on migration management. The government needs a systematic approach that maximises the benefits of migration while reducing its socio-economic costs. 

The strategy involves negotiating fair bilateral labour contracts, enjoying improved working conditions abroad and lowering the cost of hiring. The government must assist in reintegration policies to enable returnees to join domestic employment or business ventures. Retraining and skill-enhancing programmes can be used to redirect their capital and experience towards productive endeavours. The government should prioritise Nepal’s industrial and export sectors. The country should fully utilise its abundant natural resources, especially hydropower. Strengthening regulatory frameworks and easing investment procedures, the government can attract much-needed capital into large-scale energy projects.

Furthermore, addressing infrastructure bottlenecks and improving market competition would enhance export performance. It also reduces Nepal's trade deficit and promotes self-reliance. A robust digital economy is also as vital for sustainable development. Enhanced digital infrastructure can go a long way to create new economic opportunities, particularly in e-commerce, information technology and finance. Well-established digital platforms would be able to employ young aspirants who currently do not see any future in their hometown. The responsible authorities and policymakers must realise that old policies won't result in inclusive and fast growth. It requires structural changes and political will. 

The gap between the remittance-investing rich, who use remittances to pursue foreign travel and education, and the poor, low-income groups who subsist on them is increasing. A growth model that overlooks these bottlenecks can further worsen economic cracks and social instability. The government now needs to target a productivity- and innovation-led economy for long-term progress. The country can unlock its full economic potential by adopting strategic shifts in migration policies, industrialisation, digitalisation and infrastructure development. It is high time to treasure the economy that raises prospects at home and does not treat remittances as a lifeline.