Is almost all remittance spent on consumption? ... Maybe not

  • 28 percent of money sent from abroad is saved, says NRB report
- RUPAK D SHARMA, Kathmandu

Sep 8, 2016-

How is the money sent by Nepalis working abroad used at home country?

The answer one would generally get is “in consumption” and the response seems plausible for the Nepal Living Standards Survey (NLSS) 2010/11 conducted by the Central Bureau of Statistics (CBS) states that 79 per cent of the total remittance received by each household in is used for “daily consumption”.  

No wonder, policymakers, scholars and almost everyone say remittance income is being used for unproductive purposes, which, in turn, is fuelling imports, widening the country’s trade deficit.

This narrative—that remittance is being exhausted in unproductive areas, like consumption—may soon change as Nepal Rastra Bank (NRB) is coming up with a report which says only 25 per cent of money sent by Nepalis working abroad is used for consumption, while 28 per cent is saved. The caveat, however, is that NRB survey was conducted among 320 households in 16 districts, whereas NLSS was carried out in 7,020 households across the country.

“The sample size of the survey conducted by NRB may be small, but the findings are striking. It is probably time the CBS conducted a fresh survey on usage of remittance, as the data in circulation seem outdated,” a senior NRB official told the Post.

CBS Director General Suman Raj Aryal, on the other hand, declined to comment on the issue, saying he “is yet to go through the report” “I’ll read it (the report) first and see what needs to be done,” he said.

The central bank report which is yet to be finalised states that each Nepali working abroad sends home an average of Rs 500,000 per year. This amount is six times more than per capita income of Nepalis, which stood at Rs 80,921 in the last fiscal year.

Of the amount sent home by overseas migrants, 28 per cent is converted into savings, says the report. This means family members of each overseas migrant worker, on an average, save Rs 140,000 a year. 

NRB believes that a big chunk of remittance income is being saved by households because of discrepancy in figures on gross domestic savings and gross national savings. Nepal’s gross domestic savings as percentage of gross domestic product (GDP) stood at 5.26 per cent in the last fiscal year. This means 94.74 per cent of goods and services produced in the country in 2015-16 were consumed.

In contrast, the country’s gross national savings stood at 42.95 per cent of the GDP in the last fiscal year, which is one of the highest in the world. Nepal’s gross national savings is high because this macroeconomic indicator—unlike gross domestic savings—also takes remittance and foreign grants into account.

“The discrepancy between gross domestic savings and gross national savings indicates not all money sent home by Nepalis working abroad is used for consumption as stated by the NLSS,” said the NRB official who did not want to be named.

While conversion of bigger chunk of remittance income into savings may come as good news, what is worrying, as per the NRB report, is the tendency of families dependent on remittance to stay idle.

“This trend may give rise to economically inactive population,” said the NRB official. An economically inactive population includes people who do not want a job or those who are not looking for one or cannot make themselves available even if they find a work. 

Published: 08-09-2016 08:35

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