The pandemic has erected unspeakable challenges for the remittance industry and migrants. The sufferings of the migrant workers are not limited to financial loss but have a long-lasting and more severe impact on their mental health. Most of the migrants were thrown off their jobs and were stranded. This led to depleting remittances and further deteriorating economies.
After the imposition of the nationwide and worldwide lockdown in March, economists and observers predicted that millions of migrants would return home. This was expected to cause a steep fall in the incoming remittance.
However, millions of migrants did not return due to the poor health infrastructure of Nepal, according to economist Dadhi Adhikari. Despite the workers’ pleas to return, their requests were ignored, forcing them to remain in the destination country. Only 116,000 stranded Nepalis have been brought home as of October 20 from the destination countries.
In April, the Central Bureau of Statistics, World Bank, and Rastriya Bank of Nepal had predicted a remittance drop of 18%, 14%, and 15%, respectively. Nonetheless, since the beginning of the new fiscal year, the trend has been such that the level of remittance earning for the current year is expected to be at par with that of the previous year according to Central Bank’s spokesperson Gunakar Bhatta. However, with the beginning of the second wave of Covid-19, the future remains uncertain, especially in the service sector, according to Bhatta. Bhatta further added that the remittance earnings in the months of October and November would increase as migrants are more likely to send money home during festivities (Dashain and Tihar). This figure will give a clearer picture for further predictions.
Similarly, other media reports have also revealed that many migrants have continued to earn throughout the pandemic, and others have sent home money from their savings. Another reason for a stable remittance earning is attributed to the shift from informal transfers to formal ones due to travel restrictions and difficulty in carrying cash. The revised World Bank’s report on projections of remittance growth indicates that the remittance fall will be gradual but more prolonged. This decline will be caused by lower employment opportunities for migrants, poor oil price, “and exchange rates of the currencies of remittance‐source countries against the US dollar.”
“According to the macroeconomic report of Nepal’s central bank, the number of Nepali workers (institutional and individual-new and legalised) taking approval for foreign employment plunged by 99.2% in the review period. Similarly, the number of Nepali workers (renew entry) taking approval for foreign employment decreased by 86.5% in the review period.” This reflects a fall in new workers willing to migrate. However, India is exceptional to this situation as workers have returned to make their ends meet. The same cannot be said for third-country migrants as mentioned above.
Moreover, while Central Bank remains optimistic about remittances, International Monetary Funds has warned Nepal about economic growth. The rising number of Covid-19 cases in Nepal can take a hit at the recovery from the financial loss. Jonathan D Ostry, acting director at the IMF’s Asia and Pacific Department, said that Nepal’s policies must focus on flattening the Covid-19 cases curve which will further boost the economic recovery. The government must prioritise protecting the health interests of the people. However, he also added that remittances have remained volatile and entirely depend on the growth outlook of the host countries. The migrant earnings barely depend on Nepal’s economic status, and therefore, the two shouldn’t be projected as dependent on each other.
Similarly, the International Monetary Fund has also rolled back its speculation of a severe recession and revised it to a moderate recession. Furthermore, other economic predictions made for 2020 have been changed to moderate impacts, such as the World Economic Outlook Update revised the predicted global growth rate at -4.4% from a much higher contraction. Advanced economies have recovered quicker than expected after the prohibitory orders were lifted or eased.
Nepal’s remittance industry didn’t take a big hit as predicted earlier. But the decline will be more prolonged and more profound into 2021 due to the various factors mentioned above. Similarly, overall growth and road to recovery seem volatile but not severe as developed economies witnessed a quicker recovery than projected. Furthermore, the V-shaped recovery, which was earlier predicted, has now been negated as the pandemic is likely to last through 2021.Overall, the remittance inflow has remained strong, and the policies must be targeted at uplifting health facilities and security.