Remittance income grows marginal 0.8pc
KATHMANDU:
Negligible growth seen in remittance income in the first four months of the current fiscal year has worried Nepal Rastra Bank (NRB), as the central bank fears continuity of this trend may give a jolt to macroeconomic stability being enjoyed by the country for quite some time.
Remittance income grew by a meagre 0.8 per cent to Rs 180.34 billion in the four-month period between mid-July and mid-November, shows the latest Macroeconomic Report of NRB. In the same period last fiscal year, the growth rate stood at 40.5 per cent.
One of the reasons for the poor performance may be the strength gained by Nepali rupee in the four-month period.
In the first four months of the last fiscal year, per dollar was traded for Rs 99.85 on average, while in the same period this fiscal, the average dollar-rupee exchange rate stood at Rs 97.87.
While this may have played some role in reducing the growth rate, NRB does not want to lend too much weight to this argument as remittance income registered a minimal growth of 2.7 per cent in US dollar terms as well.
Remittance flow from formal channels has continued to slow since the beginning of this fiscal year.
In the first month of this fiscal, remittance income growth rate stood at mere 0.8 per cent. In second month, things turned worse and country witnessed a negative growth of four per cent. The trend repeated in the third month when remittance income fell by 0.6 per cent.
NRB was not expecting this as the number of people leaving the country for employment purpose has been continuously going up, and salary and allowances of those employed abroad are also increasing.
“There is no reason for remittance income to get hit. Yet, what was unexpected is happening. This is worrying, as continuity of this practice may ultimately distress the economy,” NRB Deputy Governor Gopal Prasad Kaphle told The Himalayan Times.
The only way to reverse this trend, according to Kaphle, is to control gold smuggling.
“But we cannot do anything on this front as we are not the concerned authority,” Kaphle said, urging the ‘concerned authorities to act fast’.
It is said that a huge chunk of money collected from Nepali workers employed overseas is not sent directly to the country, but used to buy gold abroad. This gold, sources said, is then smuggled into the country, while money handed over by migrant workers abroad is extended to beneficiaries here by local agents.
Not surprisingly, police have seized over 135 kg of illegal gold so far this fiscal.
But many say this may just be the tip of the iceberg, as commercial banks — the only institutions authorised to import gold for commercial purpose — have not been able to sell much of the precious yellow metal this fiscal, and yet there is no shortage of gold in the market.
Gold traders here are lured towards gold brought into the country through illegal channels because they can buy it for cheap. In other words, they need not pay duty of Rs 5,200 slapped on every 10 grams of gold. This gold then can be sold at market price, which factors in duty levied on import of gold.
“Unless we stop gold smuggling, growth rate of remittance income will continue to remain at a low level,” Kaphle said.
Because of low growth rate of remittance income, foreign exchange reserve, in USD, shrank by 0.3 per cent to $6.92 billion in the four-month period, while current account registered a deficit of Rs 5.86 billion, as against a surplus of Rs 48.14 billion in the same period last fiscal.
Source: THT
