GS Spark: Journal of Applied Academic Discourse

GS Spark: Journal of Applied Academic Discourse, Volume 3, Issue 1, June 2025, -

Publication date: Sep 04, 2025

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Remittances have become a critical pillar of Nepal’s economy, constituting over 26% of GDP in 2023. While they provide significant short-term benefits such as poverty reduction and foreign exchange stability, concerns about long-term economic dependency, reduced labor force participation, and stagnating industrial growth have intensified. Despite high remittance inflows, Nepal continues to face structural economic challenges, including trade deficits, underinvestment in productive sectors, and a shrinking domestic workforce. This study is essential to understanding how remittance dependency may hinder sustainable development and industrial transformation, particularly in regions heavily reliant on outmigration. Remittance inflows, while stabilizing the economy, have inadvertently become a crutch that deters industrial development and deepens structural vulnerabilities, especially through reduced capital formation, "Dutch Disease" effects, and social disruption due to youth migration. Using a qualitative, literature-based approach, the study found that over 78.9% of remittances in Nepal are spent on daily consumption, while only 2.4% are allocated to capital formation. The appreciation of the Nepalese rupee has weakened the competitiveness of tradable sectors, discouraging industrial output. The paper concludes that without strategic policy reforms, such as financial literacy, diaspora engagement, and investment redirection, Nepal’s remittance-driven economy risks long-term stagnation.

Remittances Dependency Syndrome Economic Distortion Nepal Economy Capital Formation

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