Remittances to the Kathmandu Valley

This paper gives an overview about remittances in general and takes a deeper look at remittances and their impacts to the Kathmandu Valley in Nepal. It is shown in a multi-regression worldwide country panel that a 10% increase in remittances can reduce poverty by 2.3%. Based on a survey conducted in the Kathmandu Valley, it is presented how much remittances people receive, through which channels and from which countries they receive it. The average amount per recipient household and month shows to be NPR 23’355 (USD 336). 88% of the remittances are either transferred by bank wiring or by an MTO. The countries where the most people receive remittances from are: USA (22.4%), UAE (16.7%), Qatar (14.0%). Survey and UNDP data further show that an increase of 1% in GDP p.c. in the sender country, increases remittances by 0.59%. The survey results show that remittances are mainly sent due to altruistic reasons and are not based on countercyclical behavior in order to stream line income of the recipients. The survey also showed that 46% of the recipients would work more in case they did not receive any remittances. With the help of a remittances model, which is based on the Solow growth model, some impacts of remittances are estimated and suggests that without remittances, annual Nepalese GDP p.c. growth could be around 0.16% points lower. With the same model it is also shown that if 10% of received remittances in Nepal are placed in an investment fund that invests in the Nepalese economy, GDP p.c. growth could increase from 1.75% to 1.90% p.a.