NEPAL: Remittance economy of Nepal Responding to the global recession

R emittances broadly refer to transfers, in cash or in kind, from a migrant to household residents in the country of origin. While other capital flows tend to augment during favorable economic cycles and decline in periods of economic downturn, remittances react less violently and reveal amazing stability over time.
Remittances are often of significance following conflict since they normally increase in times of crisis and directly contribute to household income. The stability of remittances emanates from the fact that senders are unlikely to be affected by the same shocks as recipients.

For Nepal, remittances, until recently, had been providing an important safety net for the economy both in terms of bringing stability to the external sector and helping to stabilize consumption levels of a significant number of households in the country. At the household level, remittances had helped to reduce poverty, improve standard of living and attain higher educational levels. Moreover, these inflows had been instrumental in maintaining the current account surplus despite a widening trade deficit. This subsequently had enabled Nepal to maintain a growing level of foreign exchange reserves. Read more