Nepal is the fourth largest remittance receiver in terms of share of gross domestic product, though remittance is not calculated among the 15 sectors of the GDP.
Revised estimates of the World Bank Migration and Development Brief suggested that remittances as a share of GDP were 52 per cent in Tajikistan, 31 per cent in the Kyrgyz Republic and 25 per cent in both Nepal – also due to rupee depreciation – and Moldova.
Remittances to many smaller developing countries tend to be equivalent to a larger share of their respective GDP, it added.
“Remittance inflows to Nepal are growing rapidly and injecting excess liquidity into the banking system but domestic credit expansion has been more moderate, as the government authorities and financial institutions apply restraint based on the lessons of their experience of 2007-2011, it said, adding that during those years, remittance inflows to Nepal surged, expanding by an annual average of almost 25 per cent. “It injected huge amounts of liquidity into the banking system, fuelling rapid domestic credit growth and raising real estate and stock market valuations to unsustainable levels. The correction in 2011 was difficult, and banks are still carrying some non-performing loans from the period.”
In 2013 and so far this year, banks have been more prudent in their lending, and much of the additional liquidity fueled by remittances is being invested at near zero interest in government bonds, though the government recorded a
budget surplus during the fiscal year 2012-13, and a similar budgetary position is expected this year, narrowing borrowing requirements
Managing the liquidity generated by remittance inflows and translating remittances into productive investment are ongoing challenges and policy goals in high remittance countries like Nepal, it added.
However, India still remains the largest recipient of officially recorded remittances in the world, and received about $70 billion in remittances in 2013, it said, adding that other large recipients include China ($60 billion), the Philippines ($25 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($17 billion)
Growth in remittances to the South Asia region has but slowed, rising by 2.3 per cent in 2013 compared with the very rapid increases of the previous three years, according to the latest brief. “It was driven by a modest increase in India of only 1.7 per cent in 2013, and a decline in Bangladesh of -2.4 per cent.”
The depreciation of the Indian rupee during 2013 appears to have attracted inflows through a surge in the deposits of non-resident Indians rather than remittances.
In Bangladesh, the fall in remittances stems from a combination of factors, including fewer migrants finding jobs in the GCC countries, more migrants returning from GCC countries due to difficulties in resolving legal status, and the appreciation of the Bangladeshi taka against the US dollar.
Still, some rebound is projected in the coming years, and remittances continue to play an important role in underpinning the balance of payments. Pakistan continued to register robust growth in remittances–its dependence on remittances, which are now nearly three times the level of international reserves, remains high.
But the brief has suggested mobile transfer to reduce the cost of remittance.
Mobile payments and new technologies are still trying to be implemented, it said, adding, “with the success of M-Pesa in Kenya, mobile money transfer and mobile banking services are expanding to other countries but progress has been slow, mostly focused on domestic remittances.”
International money transfer through mobile remittances has not progressed much due to AML/CFT concerns, lack of cross-interoperability of remittance platforms, and exchange controls, it added.
Some countries in the region have issued regulations on mobile remittances. Kenya, Rwanda and Tanzania have a mobile money model led by mobile network operators. Uganda just issued new regulations under which mobile network operators have to partner with a bank. In Nigeria and Liberia, mobile network operator cannot provide mobile money services unless they partner with a bank.