Sending Remittances to Nepal
The Nepal Rastra Bank (NRB) recently asked the government of Nepal to subsidize or otherwise reimburse fees associated with money remittance. Bank officials assert that such assistance may encourage workers to use formal, safe mediums to transfer money. Currently, the country faces a major problem with illegal money transfers and smuggling.
Nepal has experienced slower-than-average growth in the remittance business over the last 5 years, when compared to other countries in the general region, like India and the Philippines. So far, measures by the Nepalese government to increase imports and lower the country’s dependency on remittances have failed. The country’s economy depends substantially on remittance commission fees to balance limited income from tourism and exports. In fact, here’s a staggering fact: remittance accounts for the majority of Nepal’s import financing.
Reformists argue that migrant workers in other countries who send money online to Nepal greatly enhance the country’s overall economy, and they believe that government action on the reimbursement front could make a huge difference. There is some precedent for action: the country already offers exporters a 1-2% incentive on amounts of 30 goods or higher with a value addition of 30% or more.
NRB suspects that remittance funneled through illegal channels may directly link to gold smuggling problems within the country. Incentivizing legal channels for money transfer may work twofold by discouraging the smuggling operations and by improving the overall remittance industry’s yield. Currently, illegal smuggling leaves sanctioned gold untouched and unsold at NRB and other banks.
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