Remittance hit, BoP crisis looms, Forex to suffer

The suspension of new work permits for Malaysia following an announcement by the Malaysian government to stop recruitment of foreign workers will hit remittance — one of the major contributors to Nepal’s economy.
The total contribution of remittance to the GDP is 17.4 per cent, according to Nepal Rastra Bank. If remittance falls by half due to drastic job cuts in Malaysia and the Gulf — countries where there are more Nepalis — the Balance of Payment (BoP) and foreign reserve will be hit hard.“If the remittance drops — as looks certain from the present scenario — by half, our trade will be hit,” said former vice-president of National Planning Commission (NPC), Dr Shanker Sharma.
Remittance helps reduce the trade deficit. As Nepal has to pay for imports in dollars, low forexreserve will further escalate the huge trade deficit between Nepal and India forcing Nepal to either re-adjust its currency against Indian rupee or run to International Monetary Fund to rescue economy,” he said.
The spending on education and health in rural areas will also drop. “Our economy is afloat due to remittance,” added Sharma. The spiralling effect will then hit financial institutions, housing loans and real estate. “As six months of this fiscal year have already passed, the impact will be reflected in next fiscal year,” he said. The remittance has also help reduce rural poverty.
The Ministry of Labour and Transport Management yesterday decided to stopissuance of new work permits after receiving a letter from the Nepali mission in Malaysia.“However, we are searching for new labour markets,” said Mohan Krishna Sapkota, director general of the Department of Foreign Employment that started this week the long-stalled process of sending Nepali trainee workers to Japan.
“Every month, 3,500 Nepali job-seekers used to leave for Malaysia,” Sapkota said at a programme here today. Of the 2.1 million foreign workers in Malaysia, 0.4 million are Nepalis.Nepal received Rs 143 billion in remittance last year, with Saudi Arabia topping the list, followed by Qatar and Malaysia.At a conservative estimate, there are 1.24 million Nepalis working abroad. Of these, some four lakh arein Malaysia. “If each of three lakh Nepalis send $100 per month from Malaysia, the monthly remittance crosses $30 million,” Chandra Prasad Dhakal, president of Nepal Remitters’ Association (NRA), said.
The Maoist-led government has not yet been able to create jobs at home to substitute foreign employment but Lekhraj Bhatta, Minister for Labour and Transport Management (MoLTM), avers that the trend of out-bound Nepali youth is not a healthy sign. The Maoist minister from the far-west is of the opinion that the country should provide jobs at home.
“There will be more chaos if Nepalis start returning en masse,” said Dan Bahadur Tamang, a manpower agent. “Nepali embassies abroad have to be active and work to protect the rights of Nepali workers,” he suggested.
According to Sapkota, the Nepali embassy official in Malaysia will hold talks with the Malaysian Labour Department on Wednesday. More than 50,500 Nepalis left for Malaysia through official channels during the fiscal year 2007-08.