The Pulse | Economy | South Asia

Does COVID-19 Portend Dark Days in Nepal’s Future?

With a global economic slow-down and potentially millions of foreign workers returning home, Nepal could be on the brink of a humanitarian catastrophe.

By David Johnson for
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Does COVID-19 Portend Dark Days in Nepal’s Future?
Credit: Pixabay

So far Nepal, with its naturally isolated location in the Himalayas, has been spared the worst of the global health crisis caused by COVID-19. Only a handful of cases, 48, have been confirmed as of April 24 and of those all are reported to be in stable condition.

With that said, Nepal has yet to scale up its testing capabilities and to date less than 0.1 percent of the population has been tested for COVID-19. The main focus in other countries currently combating an outbreak of the virus is to flatten the curve of the infection’s exponential growth; many calculations predict that such an exponential growth rate has still to hit Nepal.

In line with over 100 other countries, Nepal has implemented a full nationwide lockdown in an attempt to stem the spread of COVID-19. The intentions behind the decision to lock down the country, which came into force on March 24, are threefold. First, given that the majority of cases within the country have come from people who became infected abroad before entering Nepal, a complete ban on international travel into the Nepal, even for Nepali nationals, aims to reduce the number of newly imported cases. Second, restricting movement within the country helps to slow the spread by reducing the rate of human-to-human transmission. Third, slowing the spread of COVID-19 within Nepal provides much-needed time for its medical services to adjust. Scaling up the country’s testing capacity and refitting its hospitals and health centers to enable proper quarantining would protect its key healthcare workers as well as other vulnerable patients.

While the decision to lock down Nepal very early on might have delayed a potentially deadly COVID-19 health emergency, there are still economic and humanitarian crises looming on the horizon.

The global pandemic has forced the Nepali government to cancel Visit Nepal 2020, an ambitious campaign aimed at attracting 2 million foreign tourists to the economically disadvantaged mountainous country. When the campaign was first announced in 2018, the goal was to channel revenue generated through tourism toward Nepal’s social and economic transformation as well as recouping the financial losses experienced as a result of the 2015 earthquakes. The Visit Nepal 2020 campaign had expected to boost Nepal’s small economy – with a GDP of just $30 billion GDP — by generating a predicted $2 billion in tourist receipts and creating thousands of new jobs. It was to be the flagship campaign that steered Nepal’s shaky but burgeoning economy away from rocky shores and into safer seas.

However, due to the COVID-19 pandemic, Nepal is now faced with a very different and much harsher reality. Foreign tourists will no longer be flocking in to spend large sums of cash before leaving with fond memories and a few souvenirs. Instead, Nepal stands to potentially see millions of now-unemployed nationals returning home from abroad.

There are upwards of 3.5 million Nepalis currently working and living abroad, whose livelihoods have been put at risk due to COVID-19. An estimated 2 million Nepalis live and work in India, while hundreds of thousands are situated in the Gulf region and Malaysia. Most are employed in low wage work as construction and domestic workers and send remittances home to their families in Nepal. In Qatar alone, there are 400,000 Nepalis, meaning they outnumber the Qataris themselves — Nepalis account for 12.5 percent of the country’s population, as compared to the Qataris as 9.35 percent.

Remittances from Nepalis working abroad account for almost 30 percent of the nation’s GDP, giving Nepal the fifth highest remittances-to-GDP ratio in the world. High rates of remittances have contributed to higher levels of education and healthcare at both the household and national level, and reduced Nepal’s overall poverty rate. For the historically unstable and disaster-prone country, remittances have proven to be an essential lifeline and often represent a reliable source of income during a crisis. For example, in the wake of the devastating 2015 earthquakes, remittances to Nepal rose by 20.9 percent — a staggering response when the preceding year remittances increased by only 3.2 percent. However, Nepal’s over-reliance on remittances as a form of resilience may have a detrimental effect during this pandemic.

As COVID-19 derails the world economy, countries have become mere passengers hurtling toward global recession. The IMF is projecting that in the best-case scenario global growth in 2020 will fall to negative 3 percent, 30 times worse than the 2009 Global Financial Crisis. Nepal is also expected to see extreme changes: its GDP growth rate will likely decelerate from 7.1 percent in 2019 to 2.8 percent for 2020. The projections predict that for the first time since the Great Depression both developed and emerging markets will enter recession, with likely consequences for Nepal and its workers in the emerging Gulf market in particular.

An oil price war between Russia and Saudi Arabia amid the global pandemic has only exacerbated problems for migrant workers in the Gulf. An intensified over-supply of crude oil during a period when demand has fallen through the floor has resulted in record low oil prices. So much so that for the first time in history the price of U.S. oil has gone negative, with oil producers in the country paying buyers $2 per barrel to relieve some of their stockpiles, which are overflowing with excess oil. Nepalis and other migrant labor workers in the oil-rich Gulf region will most likely be hit the hardest in the short term as a result of this oil price war. Gulf states will have to make considerable budget cuts to compensate for their loss of oil revenue, with the knock-on effect of fewer jobs for migrant workers.

A large influx of newly unemployed migrant workers returning home would have significant implications for Nepal’s response to COVID-19 and its national security. Nepal does not have the capabilities to quarantine and isolate a flood of returnees and would therefore risk spreading the virus to some of the country’s most vulnerable and isolated communities. World Bank figures reveal that almost 90 percent of Nepal’s poorest lack either soap or water for handwashing and would therefore be unable to take the World Health Organization’s advice on basic protective measures to safeguard themselves from the virus.

The economic insecurity caused by the dual blows to Nepal’s tourism and migrant labor force run the risk of pushing many Nepali households further into poverty. This would then prompt tough decisions between spending limited money on food or on soap to survive life during COVID-19. While the World Food Program estimates that there are enough food stocks in Nepal to last for three months and that healthy winter rains have benefited wheat crops, food insecurity in Nepal for 2020 is still a concern. The government’s strict enforcement of domestic movement during the national lockdown has produced an absence of manpower in rural areas and could result in diminished harvests.

A return of millions of Nepali migrants from abroad would likely trigger a surge in the domestic demand for food, which supply would find difficult to match. This would result in higher costs, which are already being witnessed in the Kathmandu valley, and food shortages. The already import-dependent Nepal would have to try to increase its import of foods from powerful neighbor India, which has already halted rice exports. However, with Nepal’s main generators of foreign currency, tourism and remittances, coming to sputtering stops, such action could cripple the nation’s already weak economy.

The lockdown and complete international ban were introduced to mitigate some of the concerns associated with an uncontrollable influx of returning migrants. Even Nepali nationals have been banned from entering the country from March 24 until at least the April 30. As one of the more macabre results of this draconian measure, the bodies of more than 70 Nepali workers have been piling up in labor destination countries as even the deceased are unable to enter Nepal. Nepal’s Prime Minister K.P. Sharma Oli has shown little inclination to relax the restrictions anytime soon, instead recently informing his chief ministers to further tighten border security.

While refusing entry to Nepali nationals, Oli has tried to assist Nepalis stranded abroad by highlighting the care that Nepal has shown foreigners in its country. He has also spoken with the leaders of countries with large Nepali diaspora populations with the hopes that Nepalis in the respective countries are also receiving love and support. But these hopes from the prime minister may be little more than that.

Many Nepali migrant workers in the Gulf already live in abhorrent conditions and suffer various forms of abuse due to a regional practice known as the kafala system. The treatment of these workers has been described as modern slavery and outbreaks of COVID-19 in the Gulf have only worsened their situations. During the coronavirus crisis it’s almost business as usual for construction workers building stadiums in Qatar for the 2022 World Cup. Nepali workers in Qatar are among the thousands of migrant laborers living in a virtual prison after hundreds of people in migrant camps there became infected with COVID-19. Amnesty International has also recently accused the Qatari authorities of illegally expelling more than 400 Nepali workers under the guise of testing for COVID-19 before Nepal’s lockdown came into force in March.

Since the implementation of the lockdown, Nepali migrant workers around the world have either lost their jobs or have been put on unpaid leave while struggling to pay for rent, food, and the debts which they incurred with Nepali recruitment brokers to get their jobs in the first place. With no way of returning home and no money to live in their labor destination countries, many Nepali migrant laborers have been forced into living on the streets, like those in the UAE who are scared that they will die in the streets if they cannot return home to Nepal.

Pressure is mounting on the Nepali government to lift its travel ban and allow stranded migrants abroad to return home. The UAE wants to repatriate Nepali migrants wishing to return home and has threatened to cancel bilateral labor agreements if Nepal continue to block their return. Meanwhile, Nepal’s Supreme Court has delivered an interim order to the government directing them to rescue stranded workers in vulnerable positions abroad. Therefore, it may only be a matter of time before the government is forced into reviewing its strategy. The impoverished Himalayan nation will have to evaluate the impacts of increased potential for COVID-19 spread and greater demands on food and public services in the country with the return of migrants from abroad versus damages to the economy in the future with a break in the supply of remittance-sending migrants to labor destination countries.

Either way, it appears that Nepal is on the path to becoming increasingly reliant on international aid to combat a health emergency as well as protect itself from an impending humanitarian crisis. Grants and debt relief, like that already given to Nepal by the IMF, to enable Nepal to concentrate more of its exiguous finances on vital medical and relief efforts for the present crisis may just symbolize a segment of the relief aid needed to mitigate a potential future humanitarian catastrophe. COVID-19 is set to have a much more dramatic economic impact on Nepal than the 2015 earthquakes did, since it is not an isolated incident but part of a world simultaneously battling this pandemic.

David Johnson is a research trainee at the University of Copenhagen’s Centre of Global South-Asian Studies with a master’s degree in Globalization and Sustainable Development.