Escalating violence in West Asia threatens the safety of nearly two million Nepali migrant workers and puts nearly 40 per cent of the country’s remittance inflows at immediate risk, raising fears of a wider economic shock.
The worsening conflict in West Asia has suddenly cast a shadow over Nepal’s economy, which relies heavily on money sent home by workers in the Gulf. After the joint US-Israeli military strikes on Iran triggered retaliatory missile and drone attacks across the region, daily life, businesses and employment in Qatar, Saudi Arabia, Bahrain, Kuwait, the United Arab Emirates and Oman have been disrupted. Nearly half of Nepal’s remittance inflows – worth hundreds of billions of rupees each year – now face serious uncertainty.
Migrant Workers Caught in the Crossfire
Around 1.9 million Nepali workers are currently employed across West Asia. Every year, roughly 700,000 Nepalis leave for foreign jobs; about 65 per cent, or 450,000, head to the Gulf countries. At least one Nepali worker has already been killed and 20 others injured in the Iranian attacks, according to reports reaching Kathmandu. Many more live in fear as missiles strike infrastructure and US military facilities in the region.
The human cost is immediate. Families in Nepal are anxiously waiting for news from sons, daughters, husbands and brothers working on construction sites, in hotels and in factories that have suddenly become vulnerable. With daily life upended, some workers are already considering an early return home.
Remittances: The Economy’s Backbone Under Threat
Remittances from the Gulf make up nearly 40 per cent of Nepal’s total inflows. In the first seven months of the current fiscal year, the country received Rs. 1.261 trillion in remittances, of which Rs. 444 billion came from Gulf nations. In fiscal year 2024-25, total remittances stood at Rs. 1.702 trillion, with Rs. 673 billion – or about 39 per cent – originating from the region. The share has hovered between 38.9 per cent and 45.1 per cent in recent years.
Suman Pokharel, former president of the Nepal Remitters Association, cautioned that the full impact may not be felt immediately. “Inflows may actually increase for a few months as workers send money from savings or by borrowing,” he said. “But if the crisis drags on, inflows could start declining after three to four months.” Pokharel warned that prolonged tensions could slow new labour migration and force some workers already abroad to return, creating a double burden: fewer remittances and more pressure on the government to create domestic jobs. He estimates that Rs. 40-50 billion in monthly inflows could eventually be affected, given that Gulf countries contribute around Rs. 61 billion of Nepal’s average Rs. 150 billion monthly remittances.
Broader Economic Ripple Effects
The risks extend far beyond remittances. Economist Gunakar Bhatta noted that any prolonged disruption would put significant pressure on Nepal’s economy. Remittances support imports, fuel the balance of payments and help maintain foreign exchange reserves. A sharp drop would make imports more expensive, weaken the rupee and strain reserves that currently stand at over Rs. 3.3 trillion – enough to cover 21.3 months of goods imports and 18 months of goods and services combined.
Remittances already account for nearly 67 per cent of Nepal’s total foreign currency earnings. Tourism and exports from the Gulf add smaller but important flows. Last fiscal year, 20,504 tourists from Gulf countries visited Nepal, representing 1.8 per cent of total arrivals. Trade figures show Nepal imported goods worth Rs. 48.76 billion from the region in the first seven months of this fiscal year, while exporting only Rs. 1.64 billion. Key imports include gold, silver and copper wire from the UAE (Rs. 37.06 billion), plastics and raw materials from Saudi Arabia, chemical fertiliser from Qatar and gypsum from Oman. Any disruption could hurt industries, raise construction costs and threaten food security through higher fertiliser prices.
Government Monitoring the Situation
Finance Secretary Ghanshyam Upadhyaya said the ministry is closely watching developments. “The main impact is likely to be on fuel supply, remittances, foreign employment, tourism and construction materials,” he said. “This could push up consumer prices and increase construction costs.” The government is preparing to adjust resources as needed, though the exact scale of the problem will depend on how long and how intense the conflict becomes.
Experts agree that Nepal’s heavy dependence on a single region makes it especially vulnerable. Bhatta pointed out that tourism, services and oil-related activities in the Gulf are all at risk. “It is unrealistic to expect no impact,” he said.
Pokharel urged the government to prepare contingency plans now rather than wait for a crisis. Returning workers would need jobs, and a sustained drop in remittances could slow economic growth, reduce household spending on education, health and housing, and widen the trade deficit.
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