International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper on Nepal measures the extent to which Nepal’s households change their expenditure patterns and labor supply in response to remittances, using the Nepal Household Risk and Vulnerability Survey—2016 and employing a propensity score matching method. This study provides stylized facts on migrant workers and remittance-recipient households (HH), and then analyzes the effect of remittances on HHs' expenditure patterns and labor supply. Reliance on remittances, both at the macro and household levels, makes Nepal highly vulnerable to shifts that could diminish remittance inflows. The slowdown in growth of remittances has been significant since 2016, owing to weak economic performance in major remittance-sending economies and less outward migration. This study also analyzes the effect of remittances on labor market participation of left behind household heads, using a propensity score matching method. The results show that remittances have supported greater consumption of productive goods (such as durable goods, education and health), without discouraging labor supply of remittance-receiving family members.
Ms. Manuela Goretti, Mr. Daisaku Kihara, Mr. Ranil M Salgado, and Ms. Anne Marie Gulde
Since the mid-1980s, durable reforms coupled with prudent macroeconomic management have brought steady progress to the South Asia region, making it one of the world’s fastest growing regions. Real GDP growth has steadily increased from an average of about 3 percent in the 1970s to 7 percent over the last decade. Although growth trajectories varied across countries, reforms supported strong per capita income growth in the region, lifting over 200 million people out of poverty in the last three decades. Today, South Asia accounts for one-fifth of the world’s population and, thanks to India’s increasing performance, contributes to over 15 percent of global growth.
Looking ahead, the authors find that South Asia is poised to play an even bigger role in the global economy, in both relative and absolute terms. India has overtaken China as the fastest growing large economy and South Asia’s contribution to global growth is set to increase, while more mature economies decelerate. Greater economic diversification, with an expansion of the service sector, improvements in education, and a still sizable demographic dividend are among the key elements underpinning this performance.
Based on demographic trends, more than 150 million people in the region are expected to enter the labor market by 2030. This young and large workforce can be South Asia’s strength, if supported by a successful high-quality and job-rich growth strategy. Amid a changing global economic landscape, the authors argue that South Asia will need to leverage on all sectors of the economy in a balanced way, supporting improvements in agricultural productivity and a sustainable expansion of manufacturing, while promoting higher-skill services, to achieve this goal.
Mr. Ralph Chami, Ekkehard Ernst, Connel Fullenkamp, and Anne Oeking
We present cross-country evidence on the impact of remittances on labor market outcomes.
Remittances appear to have a strong impact on both labor supply and labor demand in
recipient countries. These effects are highly significant and greater in size than those of
foreign direct investment or offcial development aid. On the supply side, remittances reduce
labor force participation and increase informality of the labor market. In addition, male and
female labor supply show significantly different sensitivities to remittances. On the demand
side, remittances reduce overall unemployment but benefit mostly lower-wage, lowerproductivity
nontradables industries at the expense of high-productivity, high-wage tradables
sectors. As a consequence, even though inequality declines as a result of larger remittances,
average wage and productivity growth declines, the latter more strongly than the former
leading to an increase in the labor income share. In fragile states, in contrast, remittances
impose a positive externality, possibly because the tradables sector tends to be
underdeveloped. Our findings indicate that reforms to foster inclusive growth need to take
into account the role of remittances in order to be successful.
International Monetary Fund. External Relations Dept.
IMF opens African technical assistance center; interview with Raghuram Rajan; IMF weighs contingent financing; Latin American growth; Nepal seeks prosperity; link between budget institutions, fiscal outcomes; fuel subsidies; IT in Ireland, India, Israel
This chapter focuses on IMF’s technical assistance (TA) activities and describes Japan Administered Account for Selected Fund Activities (JSA) including its objectives, size, scope, and use, as well as assessments of its activities, with focus on fiscal year. Activities to be funded from the JSA, as well as all other IMF TA activities, are planned each year. Reflecting greater global financial stability and fewer conflict situations over the past two years, FY2006 saw a reduction in JSA allocations for crisis prevention and the rehabilitation of economic and financial institutions in post-conflict countries, and an increase in JSA allocations for sustainable debt management and poverty reduction efforts. The distribution of the commitment of JSA funds among the subject areas has broadly reflected the foregoing distribution in the overall use of IMF resources for technical assistance. Japan also provides financial support for a scholarship program for qualified Asian nationals who want to study economics at the doctoral level at one of the leading universities in North America to pursue a career at the IMF or in their home country governments. The program covers tuition and reasonable costs for two years of study; scholars are expected to cover the remaining years of study, typically through additional funding from their universities.
Nepal has grappled with formidable economic and social challenges. Although the Nepalese economy performed well, growth has been hampered by weak infrastructure, low saving and investment rates, fiscal constraints, and a lack of absorptive capacity for boosting the needed public investment. Fiscal performance has been favorable, but progress in the area of structural reform was less encouraging. The report analyzes the recent macroeconomic developments, poverty, and environmental issues. The study also reviews the country's external and monetary developments, the fiscal situation, and structural issues.