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How a High Inward Remittance Rate Helps Nepal Thrive

Kathmandu, Nepal

Nepal is one of the countries that is highly dependent on Remittances ranking 23rd among nations of the world on inward remittance according to The World Bank report of 2015.

The Facts

  • Nepal received approx. US $ 6.594 billion as Foreign Inward Remittance from around the world, in 2015.
  • The Remittance to GDP share is an astounding 33%.
  • Nepal ranks the 2nd or 3rd in the world as far as Remittance to GDP ratio.
  • The unemployment rate in Nepal in 2015 was 2.7% of the population.
  • The per capita income of Nepal is around US $ 730 (this is amongst the lowest in the world).
  • The migrant population of Nepal amounts to 2.3 million which is around 8-9% of the total population.
  • The total labor force of Nepal is approx. 15.6 million, this makes the migrant population at a 15 % of the total labor force.
  • The main source of economy of Nepal is Agriculture & Tourism.
  • According to the World Bank report on remittances, Nepal has the lowest cost of sending money from abroad, notably among them is the Kingdom of Saudi Arabia to Nepal , United Arab Emirates to Nepal which have an average cost of 0.6 % and 3.2 % for sending an average of US $ 200.

The primary countries that send money into Nepal are India, Kingdom of Saudi Arabia, Qatar, United Emirates, United States, Malaysia, Kuwait, Australia and the United Kingdom. The second generation Nepalese population are mainly in The USA , Australia and Europe. The Nepal diaspora in the United States is majorly based in the north eastern states. The remittance that go from India to Nepal are also extremely notable and prompting the governments of both the countries to formulate a special remittance arrangement between the countries, called the Indo Nepal Remittance Facility.

Before November 30, 2014, there were no limits in place in terms of remittance in Nepal however the Nepal Rashtra Bank (NRB), issued a circular, that one year from the circular date any foreign inward remittance will have to be compulsorily paid through bank account. This initiative was not taken well as no one had prepared for such a decision.

The Nepal Money Transfer Association along with other trade bodies made representation to the NRB in reaction to this initiative. On February 8, 2015, the NRB issued an amended circular by which they stated that the maximum sum of receipt in cash would be Nepali Rupees 100,000. This again was not what the remittance companies and Nepal Money Transfer Association had asked for, based on the market trends.

On April 30, 2015, the NRB came out with another amendment circular. This circular was in line with the discussions between the remittance associations and the NRB. It stated that till July 15, 2016, the limit of cash payouts would be Nepali Rupees 300,000. After that date, the limit of cash payout will be reduced to Nepali Rupee 200,000, until July 15, 2017. After July 16, 2017 the cash payout limit will be again, reduced to the original cash payout limit of Nepali Rupees of 100,000.

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