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Remittance growth may see decline

Wednesday, 10 March 2010 10:31

Source: The Kathmandu Post

Nepal is unlikely to see the robust growth from remittances in the near future. This has been revealed by the International Monetary Fund (IMF)'s Consultation Mission on Sunday. The IMF's Mission has also suggested the government to make policy changes in view of slowdown in remittances. "The remittance growth is expected to slow down and the economy will need to adapt," states IMF's Mission's report on 'Remittances in Nepal and South Asia'. "The government should focus on policies for domestic growth," said Laura Papi, Mission chief. "It should give more attention to structural issues like power, labour relation and infrastructure."

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.

The slowdown in remittance growth, along with surge in import are major concerns for the economy in the recent times. The half-yearly review of the current budget shows remittance growth is hovering around 11 percent against the growth of 65.8 percent of the last year.

The growth in remittance had led to higher credit growth in the domestic financial market. The slowdown on the growth rate of remittance will have direct impact on consumption, import and financial system. "The slowdown in remittance growth will hit financial system," said Papi. "The deposit growth of the bank would be lower."

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.