Remittances, Stability, and Stagnation in Nepal
Jacob Rinck This article examines Nepal’s political economy from a rentier state perspective to explore the political implications of its remittance dependency. Remittances have contributed significantly to the reduction of poverty over the last two decades, but this article argues that they – together with foreign aid – also function as external rents which help to keep Nepal’s patronage democracy viable and militate against its transformation. The state derives a quarter of its budget income from external loans and grants, and more than one third from import and consumption taxes, largely driven by remittances. Therefore it is relatively autonomous from taxes on domestic production, and has little need to encourage domestic economic growth. At the same time, remittance based growth sustains the widespread rent-seeking by politicians and bureaucrats that has…