Finance Minister Yubaraj Khatiwada said on Monday that as key economic indicators of the country were improving in the midst of the Covid-19 pandemic, the financial fallout of the crisis has remained less severe than anticipated.

Khatiwada pinned his optimism particularly on the improved situation in the external sectors of the economy such as export-import, foreign exchange reserve, balance of payment, international labour market and remittances.

Speaking at a webinar organised by the Confederation of Nepalese Industries, Minister Khatiwada said that the country foreign exchange reserves are at record high due to improved inflow of remittances.

“In [the month of ] Jyestha (mid-May-Mid-June), we have received remittances worth nearly Rs 100 billion, a figure much higher than anticipated,” he said. On an average remittance Nepal had been receiving Rs70-75 billion in remittances each month before the pandemic, said the minister.

The figure quoted by Minister Khatiwada are higher than those by Nepal Rastra Bank officials who had said remittances could have declined to Rs 62 billion during Jyestha due to the impact of Covid-19.

The pandemic’s impact on remittances had been observed two months earlier, when the money sent by workers abroad dwindled to around half of the amount received during the same period the previous year. After lockdowns were imposed in countries where of Nepali migrants work between March and April, the country had received remittances amounting to Rs 34.5 billion in Chaitra (mid-March-mid-April), compared to Rs 71 billion in the same month during previous fiscal year, according to central bank. But between mid-April to mid-May (Baisakh), the figure improved to Rs 53.9 billion and to Rs 100 billion in the preceding month, according to the minister.

Due to the pandemic, the country's import bills also decreased by 15.31 percent to Rs 1.1 trillion as of the first 11 months of the current fiscal year, according to the Department of Customs.

But, the minister downplayed the role of decline in imports and highlighted the contribution of soaring remittances for the country’s growing foreign exchange reserves. “It happened largely due to improvements in inflow of remittances,” he said.

According to data for the first 10 months of the current fiscal, the country’s foreign exchange reserve stands at Rs1.23 trillion, adequate to finance imports of goods and services for 10.8 months.

But, former vice-chairman of National Planning Commission Shankar Sharma doubted Nepalis abroad sent remittances home from their current income.

“I think they sent money they had saved to help families back home as they have been affected by the lockdown,” he said. “As a large number of people are losing jobs abroad, they may not have sent money from their recent earnings.”

Minister Khatiwada, meanwhile, said that as a result of improved remittance, liquidity in banks has remained satisfactory and they are in a position to lend at reduced interest rates. “Interest rates are now coming close to single digits,” he said.

He also said that foreign labour markets were not impacted by the crisis as anticipated. “Foreign labour markets have started to reopen and we are preparing to send migrant workers to safe environments,” he said. “The number of returnees from abroad is also lower than previously expected.”

A taskfored formed by the government under the leadership of National Planning Commission member Ram Kumar Phuyal to study the impact of pandemic on foreign employment and remittances, projected that around 700,000 Nepalis would return home within a year, half of them from India.

On June 19, the Covid-19 Crisis Management Centre decided to reopen the foreign employment sector as per a proposal from the Ministry of Labour and Employment, more than three months after the government suspended all labour permits. The labour ministry has already sent a proposal to the Cabinet on sending migrant workers abroad again.

The minister also said that there have been massive improvements in international trade and domestic markets have also been expanding. “Initially, after the lockdown was imposed, international trade volume went down to as low as 20 percent [of the normal]. It has now recovered to 80 percent,” said Khatiwada. “It has also resulted in improved revenue collection and we are expecting to collect revenue close to our revised target.” The government’s revised revenue target for this fiscal stands at Rs 827 billion.

Government officials seem more relaxed now as businesses paid their taxes on time although the Supreme Court ordered the government to provide them at least 30 days to pay up after the lockdown is fully lifted.

The government on June 10 had relaxed the Covid lockdown, imposed from March 24, and allowed most economic activities to resume.

But, economist Sharma said that despite improvements in the external sector, the government is not in a situation as comfortable as it is projecting to be in. “The Covid-19 pandemic is spreading in Nepal and there is a fear of a second wave of infections across the world,” he said. “In such a situation, the need to reimpose a full lockdown cannot be overlooked. So, it is too early to become confident about the external sector of the economy.”