Experts warn that Nepal’s economy, heavily reliant on remittances, is in jeopardy due to heightened tensions in the Middle East following Iran’s recent attack on Israel.
Tehran’s warning of further strikes if Israel or the US retaliate has exacerbated concerns. The attack, involving over 300 drones and missiles, occurred on Saturday night, prompting leading Indian airlines to cancel flights to Iran and restrict airspace usage.
Nepal, largely dependent on remittance earnings, faces significant risks. Remittances have fueled a surge in consumption, with average annual spending increasing by 66% over the past 12 years, reaching Rs126,172 in 2023.
According to the Nepal Rastra Bank, remittance inflow hit a record high of $9.33 billion in the last fiscal year. Over 774,000 Nepalis ventured abroad for employment, with Qatar, the UAE, and Saudi Arabia being key destinations.
Experts fear that a crisis in the Middle East, employing nearly half of Nepal’s migrant workers, could have devastating effects. Ganesh Gurung, a migration expert, underscores the importance of preparing for potential shocks.
Geopolitical turmoil also threatens to push up inflation, affecting the economy’s stability. The Asian Development Bank warns of disrupted supply chains, potentially leading to global inflation and financial tightening.
Chandramani Adhikari, an economist, highlights the repercussions on Nepal’s labor market. The conflict could halt Nepali migration to the Gulf, resulting in increased unemployment and social unrest.
Moreover, declining remittances could strain foreign currency reserves, compounding economic stress amid stagnant domestic production. Gurung stresses the need for proactive measures to mitigate potential shocks.
Amidst escalating tensions, countries like South Korea are bracing for economic repercussions. Nepal’s foreign ministry closely monitors the situation, advocating for dialogue and diplomacy to restore peace.
Rising oil prices and threats to shipping routes pose additional challenges. The World Bank reports a threefold increase in shipping costs, affecting global trade and Nepal’s remittance flow.
Adhikari warns of the broader impacts, including reduced foreign aid and investment. Strengthening the dollar and increasing inflation further threaten Nepal’s economy, necessitating careful monitoring and preparedness.
As Nepal navigates these challenges, proactive measures and international cooperation will be vital in safeguarding its economic stability amidst escalating geopolitical tensions.
