External Demand, Domestic Monetary Conditions, and Remittance Dynamics in Nepal
Why Nepal's lifeline from abroad depends on global jobs and interest rates
When jobs grow in countries where Nepalis work, more money flows home as remittances — but when Nepal's central bank tightens monetary conditions, remittances shrink. The analysis of 30 years of data shows remittances could reach 28% of Nepal's GDP by 2030, making the country's economic stability heavily dependent on foreign employment markets and sensitive to sudden external shocks.
Nepal receives nearly a third of its national income from remittances sent by citizens working abroad, making the country vulnerable to forces outside its control. Understanding what drives these flows helps policymakers design safer strategies — like diversifying where migrants work and deciding whether to tighten or loosen money supply during global downturns — rather than leaving the economy exposed to economic shocks in destination countries.