Context and immediate risks
Remittances, the biggest source of foreign currency, could take a hit along with trade and tourism, experts warn. 1,200 to 1,500 Nepalis are leaving daily for Gulf countries for jobs. The conflict will stop many Nepalis from going to such countries.Post File Photo The Kathmandu Post
Remittance-dependent Nepal may face a dizzying sequence of shocks, particularly in the labour market, due to escalating tensions in the Middle East. Reports show that Tehran has warned it will strike again with greater force if Israel or the US retaliates for the Iranian strike on Israel. The Iranian attack, which involved more than 300 drones and missiles, were carried out on Saturday night. The Kathmandu Post
Remittances, reserves and exposure
“Remittance inflows increased 16.5 percent to Rs.1445.32 billion during 2023/24 compared to an increase of 23.2 percent in the previous year. In the US Dollar terms, remittance inflows increased 14.5 percent to 10.86 billion in the review year compared to an increase of 13.9 percent in the previous year.” — Nepal Rastra Bank, Current Macroeconomic and Financial Situation (based on annual data of 2023/24) Nepal Rastra Bank
“Gross foreign exchange reserves stood at USD 15.27 billion. This level of foreign exchange reserve is sufficient to cover the merchandise and services imports for 13 months.” — Nepal Rastra Bank (mid-July 2024 data) Nepal Rastra Bank
Transmission channels: how global conflict can affect Nepal
-
Labour markets and remittances: “As we see, 1,200 to 1,500 Nepalis are leaving daily for Gulf countries for jobs. The conflict will stop many Nepalis from going to such countries. If these countries stopped hiring workers, the number of unemployed will rise” (migration expert quoted). The Kathmandu Post
-
Energy and inflation: “Besides, say economists, conflict in the key oil‑producing countries pushes up inflation.” Oil prices rose on geopolitical tensions; Brent crude reached $90.21 per barrel in reporting. Rising oil prices and a stronger dollar will affect Nepal’s consumption and inflation. The Kathmandu Post
-
Trade and shipping costs: “The World Bank said … the cost of shipping from Asia to Europe has jumped to over US$3,000 for a 40-foot container, a threefold increase over the lowest rate in 2023.” Disrupted shipping routes (e.g., threats to the Suez Canal) raise import costs for an import‑heavy economy. The Kathmandu Post
-
Macro and financial spillovers: any intensified geopolitical turmoil could disrupt supply chains, increase global inflation, and tighten financial conditions worldwide — which may lead to tighter domestic monetary policy, undermining investment and consumption. The Kathmandu Post
Medium-term outlook and policy signals from multilateral analysis
“Nepal’s economy is anticipated to grow by 4.4% in fiscal year (FY) 2025, up from an estimated growth of 3.9% in FY2024… Gross domestic product (GDP) growth is forecasted to reach 5.1% in FY2026, fueled by government reforms… Risks to the outlook tilt to the downside. Ongoing tariff rises may cause a global economic downturn, affecting Nepal’s tourism receipts and remittances, and lower foreign aid could negatively impact growth.” — Asian Development Bank, Nepal’s Economy to Strengthen in FY2025 and Further in 2026 Asian Development Bank
The ADB cautions that higher global tariffs, trade disruptions, or a slowdown in remittances are downside risks that could reduce growth and fiscal space. Asian Development Bank
Key data points (sourced)
- Remittances (FY 2023/24): Rs. 1,445.32 billion; US$10.86 billion (14.5% increase year‑on‑year). Nepal Rastra Bank
- Gross foreign exchange reserves (mid‑July 2024): US$15.27 billion — enough for ~13 months of merchandise and services imports. Nepal Rastra Bank
- Observed labour outflow (latest reporting period): hundreds of thousands of first‑time approvals and renewals for foreign employment; Gulf countries account for a large share of Nepali workers. Nepal Rastra Bank, The Kathmandu Post
Excerpts on recommended readiness (expert commentary)
“The government needs to start preparing to absorb the potential shock.” — migration expert quoted on steps to prepare for geopolitical shocks. The Kathmandu Post
ADB highlights reforms to improve capital budget execution, revitalise tourism, enhance agricultural productivity and maintain prudent macro policy as measures that support resilience. Asian Development Bank
Images
Source: The Kathmandu Post The Kathmandu Post
Source: Asian Development Bank Asian Development Bank
Share Your Thoughts
- What impact could a major global conflict (e.g., large‑scale war among world powers) have on remittance flows, inflation and jobs for Nepalis abroad?
- Which short‑term fiscal or monetary steps should Nepal’s leaders prioritise to protect vulnerable households?
- How can remittances be better channelled into productive investment to reduce vulnerability to external shocks?
- What role should regional diplomacy and labor agreements with destination countries play in protecting Nepali workers?
- Are our foreign exchange reserves and policy tools sufficient, and what contingency measures would you recommend?
Sources: Nepal Rastra Bank — Current Macroeconomic and Financial Situation (based on annual data of 2023/24) Nepal Rastra Bank; “Escalating Middle East crisis threatens Nepali economy” — Krishana Prasain (The Kathmandu Post) The Kathmandu Post; “Nepal’s Economy to Strengthen in FY2025 and Further in 2026” (Asian Development Bank) Asian Development Bank