Nepal may see 28.7 percent contraction in remittance in 2020, highest in the developing Asia, ADB saysBut Nepal Rastra Bank says as China’s demand for oil will create jobs in Gulf countries, Nepal may not see a big contraction on remittance earnings despite the pandemic.
Nepal appears on the top list of the countries that may face most losses in remittances due to the Covid-19 pandemic, says a new report.
Based on the worst-case scenario, the country’s remittance earnings could fall by as much as 28.7 percent in 2020, as job losses mounted and employers trimmed payrolls in key labour employing countries, according to ‘Covid-19 Impact on International Migration, Remittances, and Recipient Households in Developing Asia’ report, released by the Asian Development Bank on Monday.
This translates to an estimated loss of $2.32 billion based on the baseline data of 2018. Nepali migrant workers sent home $8.29 billion in 2018, according to the World Bank data.
The worst-case scenario assumes control of Covid-19 pandemic domestically and resumption of economic activities within a year. The Asian Development Bank said, however, that uncertainty looms about the timing of full recovery, even as lockdowns are lifted.
“Without continuous remittance flows, remittance-dependent households can fall into poverty or have difficulty meeting basic essential needs, as well as access to education and health services. Loan repayment is another challenge for remittance recipient households,” the Manila-based multilateral funding agency said in its report.
The countries facing "more severe" effects are those where the share of remittances to the gross domestic product (GDP) are high. Nepal’s share of remittance to the country’s GDP stands at 27 percent.
Gunakar Bhatta, spokesperson for Nepal’s central bank—Nepal Rastra Bank, does not fully agree that remittance would fall to that extent. “Obviously, the situation is uncertain. The remittance income will not see a contraction by one-fourth as reported.”
In April, the Nepal Rastra Bank had projected a drop of over 15 percent in remittances in the last fiscal year 2019-20 which ended in mid-July. In the same month, the World Bank also projected remittances to go down by 14 percent. Similarly, the Central Bureau of Statistics also projected a reduction of Rs163 billion, or over 18 percent.
“But all of their assumptions were wrong,” said Bhatta.
After a sharp drop in April, there has been a noticeable improvement in remittances. “And based on the preliminary study and inquiry from the banks, we see remittance income hitting close to last year’s level or $8.1 billion.”
According to statistics from the central bank, the country received remittances amounting to Rs34.5 billion in mid-March-mid-April, compared to Rs71 billion in the same month the previous fiscal year.
But from mid-April to mid-May, the figure improved to Rs53.9 billion and according to preliminary figures from the central bank, remittances from mid-May to mid-June grew to Rs62 billion.
As China’s oil demand has recovered to more than 90 percent of the levels seen before the coronavirus pandemic struck early this year, it has given a surprisingly robust rebound for oil trade, said Bhatta. “This could lead to a demand for workers in oil-producing nations. The Arab nations are also resuming their manufacturing activities.”
“In Gulf states such as Saudi Arabia and the United Arab Emirates, which rely on migrant labour, the drop in the price of oil and economic activity has forced Nepali migrants to return home. It’s still uncertain, whether these countries will begin hiring,” said Jeevan Baniya, a labour migration researcher.
“It may take 2-3 years for the situation to normalise. So, things are not looking good for the country’s economy as well as the status of migrant workers,” said Baniya, assistant director at the Centre for the Study of Labour and Mobility at Social Science Baha.
“They are returning sooner or later and if the government is unable to make proper use of their skills, it could heighten social problems like frustration, suicide and troubled relationships in the family. People could even take risks at work even if they are infected with coronavirus. For the poor, money matters.”
The Asian Development Bank has suggested that governments in the region could help manage the impact of Covid-19 on remittances by extending temporary social services to assist stranded and returning migrants; providing income support to poor remittance-recipient families; and designing health, labour, and skills policies to help migrants return to their jobs, or be employed in their home countries.
The ADB’s report said that newly recruited migrants and those who were on vacation at home face the bleak prospect of losing their jobs. A new batch of Nepali migrant workers bound for South Korea and Qatar, for example, have been asked to put off their departures until further notice.
Remittances across the world could decline by $108.6 billion this year as job losses mount and employers trim payrolls amid a Covid-19 pandemic that has devastated economies.
Money sent to Asia, where about a third of migrant workers worldwide come from, could fall by $54.3 billion, the report said.
All the plans Nepal initiated, particularly bringing back stranded Nepalis abroad, were not accomplished.
According to Bhatta, it was estimated that over 200,000 Nepalis needed to be rescued and repatriated immediately. “But so far, only 30,000 came back to the country on flights,” he said. “There is no data available on how many workers entered the country from the porous Nepal-India border points.”
He said that migrant workers may have felt safe to live where they were given the ill preparation of Nepal to deal with the Covid-19 pandemic.
“We haven't even reported a major layoff in many countries as it was reported. Initially, reports came out that nearly 20 percent or 280,000 of the Nepali migrant workers abroad were at risk of losing their jobs as a result of the pandemic and will return home in the coming months,” he said. “But that did not happen.”
According to a research paper—Covid-19 and Nepali Labour Migrants: Impacts and Responses—released recently by the Centre for the Study of Labour and Mobility, there are approximately 3.2 million migrants outside Nepal, a number comprising those who migrated for work, education or other reasons.
An overwhelming majority of 88 percent, or 2.8 million, have left Nepal for reasons related to work, ‘service and job’ or ‘looking for work’, while around 6 percent went for studies or training and 5 percent migrated as dependents, before the pandemic.