In the first month of the fiscal year, remittance growth was less than 1 percent, which decreased in the second and third months. The situation improved in the latter months, but the growth remained sluggish.

According to the central bank, there has been a massive surge in remittance inflow after the April 25 Great Earthquake as migrant workers sent home money for reconstruction and repair of their houses.

Many banks and remittance companies offering free transactions fee services also encouraged the migrant workers to send money home. Furthermore, the smuggling of gold also largely stopped due to reduced demand, NRB officials said. It has been reported that remittance was used to for gold smuggling, central bank officials said.

“Particularly, the planned action against Hundi operators mounted physiological pressure on them, resulting in a surge in remittance inflow through formal channels,” said NRB Spokesperson Min Bahadur Shrestha. “NRB, along with the police and the Department of Money Laundering, among others, had been collecting information about Hundi operators which forced them to postpone their transactions for the time being.”

According to NRB, there has been massive surge in remittance inflow in the month of mid-April to mid-May after the earthquake. The central bank collected foreign exchange worth Rs53 billion from commercial banks in the month against an average collection of Rs30 billion in the previous months.

The NRB collects foreign exchange while providing Nepali currency to commercial banks, the central bank’s intervention in the foreign exchange market.

According to Shrestha, there has also been a surge in the inflow of foreign aid to the accounts of donor agencies and non-government organisations. “We expect the remittance inflow will grow 9-10 percent on mid-May,” said Shrestha.

Meanwhile, inflation decreased to just 6.9 percent, particularly due to reduced price in India. Food inflation increased 8.7 percent and non-food item prices rose 5.3 percent during the review period.

According to Shrestha, a massive downturn in Indian inflation influenced Nepal’s price index as the country imports two-thirds of goods from the southern neighbour. “There have not been strikes and supply-related constraints which also contributed to low inflation,” said Shrestha.

He said the central bank does not expect the inflation to surge in the 10th month of the fiscal year as there has not been rise in the prices of many goods, except for tents, zinc sheets and a few other goods.

“Inflation may surge in the next fiscal year as the demand will rise massively during the reconstruction process,” he said.