RemittancesGateway.org

Nepal may see slower growth in remittance

Monday, 08 March 2010 12:32

Source: Nepal News

International Monetary Fund (IMF) has said that Nepal  is unlikely to see the robust growth from remittances in the near future.

The International Monetary Fund (IMF)'s Consultation Mission also suggested the government to take into account a slow remittance growth while projecting the revenue mobilization for the next fiscal year.

"The sluggish remittance growth is expected to slow down the national economy," IMF officials said.

The Mission's report shows remittance growth in Nepal will hover at just over 10 percent in the next two fiscal years. Nepal had registered robust growth in remittance inflow in the last two fiscal years.

Laura Papi, Division Chief, Asia and Pacific Department of IMF, said that the remittances had led to high credit growth, financed high imports while boosting forex reserves and a major role in the economy.

She added that the effects of slower growth will have direct impact in financial system, consumption and imports and indirect impact in tax revenue growth.

The growth of tax revenue will also be hit by the deceleration in remittance growth. The revenue target needs to be projected with sluggish remittance growth rate, according to the mission.

Nepal’s economy has suddenly entered into a critical phase after the country witnessed a sharp drop in remittance growth rate. This has ballooned country’s balance of payment (BoP) deficit, depleted foreign currency reserve and worsened liquidity in the market.