Domestic and foreign remittances in Nepal: Contributions, disruptions, and policy implications
Summary
Remittances play a vital role in Nepal's economy, constituting about 26.6% of GDP with recent inflows reaching Rs 1,723.27 billion in FY 2024/25, but recent regulatory restrictions on domestic remittance services have caused financial exclusion and economic disruptions, prompting calls for reform.
Key Points
- Remittances accounted for about 26.6% of Nepal's GDP in 2023, with inflows reaching nearly Rs 1,723 billion in FY 2024/25.
- Domestic remittance services have historically supported rural households by providing affordable, accessible money transfer options and promoting financial inclusion.
- Nepal Rastra Bank imposed tighter regulations since 2022, drastically reducing allowable domestic transfer limits and causing many service providers to cease operations.
- The shutdown of domestic remittance services has led to financial exclusion for rural populations, loss of income for service providers, and potential growth of informal money transfer systems like Hundi.
