Kathmandu – Rising tensions in the Middle East following the death of Iran’s Supreme Leader Ali Khamenei have raised concerns about the security of remittance inflows to Nepal, potentially creating significant economic challenges for the government formed after the upcoming elections.

Iran has reportedly launched retaliatory actions in the Middle East, escalating tensions in major labour-destination countries for Nepali migrant workers, including Qatar, the United Arab Emirates, and Kuwait. As remittances remain a key pillar of Nepal’s economy, the growing instability in these regions has increased fears of unexpected economic disruptions.

Experts warn that political parties and candidates campaigning with promises of economic prosperity may face unforeseen difficulties in governance after the elections if remittance flows decline.

Director of the Civil Aviation Authority of Nepal (CAAN), Pratap Babu Tiwari, said that remittance inflows are at risk because a large number of Nepali migrant workers are employed in Gulf and Middle Eastern countries.

“Remittances contribute nearly 28 percent to Nepal’s GDP. Most Nepali migrant workers are in the Gulf and Middle East. Due to rising tensions in these regions, many workers have been stranded, flights have started to be cancelled, and there is uncertainty about when the conflict will end. This has put remittance inflows at risk,” he said.

According to Tiwari, the situation could also affect Nepal’s foreign exchange reserves and domestic consumption.

“This could reduce domestic consumption and put pressure on Nepal’s foreign exchange reserves, making the economy more vulnerable. It could become a major challenge for the newly elected government,” he added.

Nepal’s economy has remained relatively stable largely due to remittance inflows. However, political parties that entered the election with promises of economic prosperity may now face unexpected economic pressures.

During the COVID-19 pandemic, when global lockdowns threatened remittance inflows, the government launched the Prime Minister Employment Programme with a loan from the World Bank to provide immediate employment opportunities, particularly to returnee migrant workers.

However, after the pandemic subsided, the programme faced widespread criticism for allegedly being misused to benefit party cadres. Although the World Bank loan period has now expired, the Ministry of Labour has yet to publish a study evaluating the programme’s effectiveness.

Remittance Remained Strong Before Middle East Tensions

According to Nepal Rastra Bank, remittance inflows increased by 35.6 percent during the first five months of fiscal year 2025/26, reaching Rs 870.31 billion, compared to a 4.7 percent increase during the same period last year.

In the month of Mangsir alone, remittance inflows reached Rs 183.18 billion, up from Rs 118.79 billion recorded in the same month of the previous year.

Nepal’s banking system remains heavily dependent on remittances, which serve as the primary source of liquidity and a major contributor to foreign exchange reserves.

As of mid-Mangsir, Nepal’s foreign exchange reserves stood at Rs 3.21 trillion, sufficient to cover 21.7 months of merchandise imports and 18.2 months of goods and services imports.

Any major disruption in remittance inflows could pose serious risks to Nepal’s foreign trade and overall economic stability.