It was published in Pandemic Borders, Open Democracy, 16 March 2021.
Money from overseas makes up a quarter of GDP, and the effects of the pandemic are putting a squeeze on an already struggling economy
For Nepal, like other developing countries that depend on migrant remittances, the COVID-19 pandemic has dealt a severe blow.
Money sent home by the thousands of Nepali migrant workers abroad amounts to about 25% of the country’s GDP, making it one of the most dependent countries on remittances in the world.
Reverse migration since the spread of COVID-19 has compounded unemployment problems in an already lockdown-battered economy. This means that timely and meaningful reintegration of the returning migrant workforce should be one of the top priorities, especially given that international travel and the global economy are not projected to fully recover any time soon.
Reverse migration
Since the lockdown started in March 2020, there has been a steady inflow of migrant workers returning to their home countries. Nepali migrant workers in India travelled by road, often walking for days to reach the border. Those in other countries were repatriated on special chartered flights operated by the government.
There is no official data on the exact number of migrant workers who have returned to Nepal since the lockdown, but in May the Nepal Association of Foreign Employment Agencies estimated that over half a million migrant workers wanted to return, especially from the Middle East and Malaysia.
Remittances have supported household consumption, propped up government finances (as revenue from imports financed by remittances alone account for 45% of total tax revenue), boosted banking sector liquidity and credit growth, increased household spending on healthcare and education, and helped to maintain external sector stability despite a ballooning trade deficit. All this means that the country will face a tough time reintegrating returning workers.
Reintegration
With the healthcare crisis requiring more public spending just to provide emergency relief, this severely curtails the country’s ability to effectively fund reintegration of returning migrant workers. The government estimated that it would need about $1bn just for employment programmes to deal with the impact of COVID-19.
A large gap between expenditure and revenue means that Nepal will need more international support to boost social protection-related spending in the next few years. Internally, it will have to reduce wasteful spending such as funding of pet projects, bailing out consistently underperforming state-owned enterprises, and non-targeted subsidies.
To enhance governance and targeting, it may be useful to use digital platforms to identify eligible beneficiaries of various government programmes and possibly transfer any cash handout directly to their bank accounts.
Another way to support returning migrants is to provide them with access to affordable credit to help those who are willing to start their own business ventures
In fact, there already exists social protection and public workfare programmes that can be better utilised to quickly engage returning migrant workers at the local level. For example, the Prime Minister Employment Program, which guarantees a maximum of 100 days of employment at subsistence wage, has been severely under-utilised so far. From July 2020, until March 3 this year, it provided an average of six days of work for 25,852 people out of 743,512 listed unemployed people in its roster.
The programme was launched in early 2019 to reduce youth dependency on overseas jobs and to create job opportunities within the country itself. Ramping up this programme with adequate budgeting and targeting could be beneficial in the short term to employ returning migrant workers.
Unfortunately, a fallout of the ineffectiveness of this programme was that many migrant workers who returned home are again actively pursuing job opportunities overseas. For instance, by September 2020, there were long queues of migrant workers at the Indian border points waiting for an opportunity to enter India for employment.
Technical and vocational education and certification could be another option for reintegrating migrants who are willing to enhance their skills and perhaps change profession. This could be done in partnership between government and businesses.
Another way to support returning migrants is to provide them with access to affordable credit to help those who are willing to start their own business ventures. Programmes such as Youth and Small Entrepreneurs Self-Employment Fund are set up to subsidise interest on loans for self-employment, and could be used for this.
The fund has not been as effective as expected largely owing to politicisation, a high interest burden even after subsidy, and approval hassles. Since its launch a decade ago, there are just 72,789 recipients, including 6,500 between July 2019 and July 2020. The central bank has also launched a scheme to issue subsidised loans at 5% interest to returnee migrant workers, among others. However, the uptake has been slow.
Successful reintegration would not be possible without accelerated economic growth as domestic employment opportunities will remain constrained, contributing to the “push factor” for outmigration which compel folks to migrate overseas for employment and safety.
Short-term economic stabilisation measures followed by structural reforms to ensure sustained and inclusive economic growth are required. In this process, more digitalisation, better targeting and, most importantly, sound governance will be vital.
