Nepal’s remittances surged 35.4 per cent to Rs 553.31 billion in Q1 FY2025/26. The rise is attributed to a strong dollar, formal channels, migration fuel record inflows. However, economists fear that over-reliance on remittances risks long-term development.
Nepal is experiencing a remittance windfall. According to the Himalayan nation’s central bank, Nepal Rastra Bank (NRB), remittance inflows surged by 35.4 per cent to Nepali Rs 553.31 billion in the first quarter of fiscal year 2025/26, marking a sharp acceleration from 11.9 per cent growth in the same period last year.
Between mid-September and mid-October alone, Nepal received Rs 201.22 billion, up from Rs 144.17 billion during the same span last year. In dollar terms, remittances jumped 29.2 percent, reaching US$ 3.94 billion in the quarter.
Nepal’s remittance story in the first quarter of FY 2025/26 is one of record-breaking inflows: stronger dollar, more formal channels, and booming migration have all helped fuel a surge. Yet, while these funds are shoring up foreign reserves and household incomes, there’s growing concern that the “remittance economy” model could undermine long-term development if not paired with investment in productive sectors.
Dollar Strength, Formal Channels, and Migration
Economists attribute the remittance boom to a confluence of factors. Firstly, the US dollar has strengthened significantly against the Nepali rupee, boosting the rupee-equivalent value of money sent back home.
Secondly, anti–money-laundering measures have tightened across financial institutions, pushing more migrants to use formal banking channels instead of informal ones. And thirdly, labour migration is on the rise: in the quarter under review, 123,459 Nepalis received first-time foreign employment approvals, while 77,257 renewed theirs – up sharply from a year ago.
The shift to regulated systems is also improving transparency. Labour researcher Jeevan Baniya notes that digitisation, especially in countries like South Korea, has made formal remittance easier than before.
Record Monthly Inflow Amid Festivals
Remittances in Nepal crossed Rs 200 billion in a single month for the first time, with Rs 201.22 billion received during the mid-September to mid-October festival period – a historic high.
This spike is partly driven by Nepal’s major festivals – Dashain (or Dussehra), Tihar (or Deepawali), and Chhath – when Nepali migrant workers typically send larger sums home. This seasonal surge is well known among economists: nearly 40 per cent of annual GDP-linked economic activities happen during this festival-rich stretch.
Risks Underlying the Remittance Reliance
While the inflows are a boon, experts caution that heavy reliance on remittance poses risks. Despite the record inflows, this money isn’t fuelling broad-based domestic investment. Business leaders argue that low development spending and weak private-market demand are holding back growth.
The surge in remittances has also inflated foreign exchange reserves, which stood at Rs 2.97 trillion (US$ 21.21 billion) by mid-October – sufficient to cover 16.4 months of combined goods and services imports.
Meanwhile, some labour-market analysts warn of a “brain drain” and stagnant economic transformation. As more young Nepalis leave, the country risks depleting its workforce. Political volatility and the failure of sectors like manufacturing and services to generate jobs are amplifying this trend.
Despite the windfall, Nepal’s economic vulnerability also deepens: a prolonged slump in global remittances or a currency swing could expose structural weaknesses.
