COVID-19 and Remittance Flows in Nepal: Potential Turning Point for Development

Can this unprecedented crisis push Nepal to reform and absorb its human capital?

The Nepali economy shows an atypical structural change over the past one and half decades - the movement of labor out of agriculture was not triggered by new jobs in industries or in high skilled professional services, but by foreign employment opportunities. The remittances sent by such migrant workers back home are estimated to constitute a quarter of the income of all households and almost two-thirds of the income for those receiving money from abroad. In addition, the remittances have contributed to reduction in poverty and human development by increasing household investment in education and health.

The spread of COVID-19 has changed the scenario. Most of the destination countries for Nepali migrant workers have adopted non-pharmaceutical measures to contain the spread of virus such as lockdown and workplace closure which has significantly disrupted economic activities and hurt well being and jobs. Furthermore, the COVID-19 crisis has suppressed global demand for oil and resulted in collapse in the price of oil, key income sources of many destination countries of migrant workers. This has had a devastating economic impact both in the destination and source countries of migrant workers. This research assesses the potential impact of COVID-19 on remittance flows in Nepal.

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By Posh Raj Pandey