From Evidence to Policy Supporting Nepal’s Trade Integration Strategy : Trade Imbalances and Remittances
Nepal's trade balance in goods and services has been in deficit for many years. The large deficit has not resulted in a substantial accumulation of net foreign liabilities, as it has been largely financed with workers' remittances from ab...
| Main Authors: | , |
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| Format: | Report |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/07/26584622/evidence-policy-supporting-nepal’s-trade-integration-strategy-policy-note-1 http://hdl.handle.net/10986/24923 |
| Summary: | Nepal's trade balance in goods and
services has been in deficit for many years. The large
deficit has not resulted in a substantial accumulation of
net foreign liabilities, as it has been largely financed
with workers' remittances from abroad. Indeed,
remittances are the largest component of the current
account. This report aims at addressing the following
questions: what are the underlying drivers of the trade
imbalances and their relative contributions to the deficit
(e.g. domestic private expenditure fueled by remittances
versus public expenditures, relative prices, etc.)? What are
the paths to be expected for the trade balance and the
current account in the medium run, based on reasonable
forecast assumptions for the main identified determinants?
What are the implications of high remittances for the
competitiveness in the short and long-run? How can Nepal
maximize the positive impact of remittances in the economy?
The authors assess the impact of remittances on Nepal's
real exchange rate and attempt to distinguish between their
short and long term impact. To conclude, efforts to increase
savings and improve the allocation of remittances should
also be accomplished through improvements in the overall
investment climate and the business environment. |
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