Sunday, November 14, 2010

Remittance inflow slows down

Weakening dollar and post-recession is hurting the remittance inflow.
An important factor affecting the US dollar valuation of remittances is changes in the exchangerates between the relevant local currency and the US dollar has slowed down the growth of remittance growth to the receiving.
"Nepal has received Rs Rs 38.4 billion -- an invrement of 9.7 per cent only -- in the second month of the current fiscal year compared to its growth of 19.7 per cent in the same period of last year," according to the central bank.
"Though, on a monthly basis, the remittance inflow grew by 11.5 per cent in August-September compared to the same month of the last year," the report added.
Similarly, the remittances increased by five times less to only 7.8 per cent in the first month of the current fiscal year compared to its growth of 35.3 per cent in the same period lasy year.
Remittance is constantly gaining importance in the economic planning of all the major developing economies of the world like Nepal. With globalisation and technological advancements in communication systems and more open approach to acquisition of manpower from across the borders, internationally, has given right to recognition of remittance as an important market phenomenon.
According to the World Bank, it is anticipated that the global remittance market would grow at 9.2 per cent during 2010-11, as the global economy recovers agains the global remittance market that had reported a decline of 6.5 per cent in 2009 in response to economic downturn.
The developing countries which include several low and middle income countries, account for more than three fourth of the global remittance inflows with majority contribution from India, China, Mexico and Philippines, due to their large emigrant population.
East Asia & Pacific and South Asia region collectively account for almost half of the total remittance flows to developing countries.
With migration destinations becoming more diversified across the continents remittances are showing increased resilience and a shift in flow and share amongst the nations. Though demand for Nepali migrant workers has been going up, the remittnace has not seen remarkable increment.
Around 2,94,094 Nepali migrant workers went left for the destination countries in the last fiscal year, according to the government data.
"The developing countries which include several low and middle income countries, account for more than three fourth of the global remittance inflows," the report said, adding that East Asia and Pacific, and South Asian region collectively account for almost half of the total remittance flows to developing countries.
Remittance flows to South Asia grew strongly in 2008 despite the global economic crisis, but now there are risks that they may slow down in a lagged response to a weak global economy, the report had said last year expecting that there could be a recovery in 2010 and 2011.
In all the regions, remittance flows are likely to face three downside risks: a jobless economic recovery, tighter immigration controls, and unpredictable exchange rate movements. Despite these risks, remittances are expected to remain more resilient than private capital flows and will become even more important as a source of external financing in many developing countries. Policy responses should involve efforts to facilitate migration and remittances, to make these flows cheaper, safer and more productive for both the sending and the receiving countries.
However, remittance flows to South Asia have proved to be stronger than our earlier expectations. Remittance flows to Pakistan, Bangladesh and Nepal also increased.
Although recovery will gather pace, according to the forecasts, growth will remain weak in 2010 and 2011 and is unlikely to reach the brisk pace seen before the crisis, it added.
Remittance flows to developing countries are expected to remain almost flat in 2010, with a modest increase of 1.4 per cent, and grow by 3.9 per cent in 2011.
A deceleration in construction activities in the Gulf Cooperation Council (GCC) may impact migrant-sending countries in South Asia like Nepal, while a recovery in oil prices and fiscal stimulus implemented by GCC governments is likely to help maintain employment levels for existing migrants, new migration flows are unlikely to grow over the next two years.

Year -- Remittance
2005-06 -- Rs 97.69 billion
2006-07 -- Rs 101.44 billion
2007-08 -- Rs 142.68 billion
2008-09 -- Rs 209.69 billion
2009-10 -- Rs 231.72 billion

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