The impact of the war in Iran on migrant workers in Nepal

Migration should be a choice, not a necessity. For Nepal, it is exactly the opposite. Without the opportunity to work abroad — mostly in the Gulf states — Nepal’s economy would be missing between 8 to 25 percent of its GDP (depending on the sources consulted). Nepal receives on average the equivalent of about 850 million Euro in remittances each month, of which about 40 percent—the equivalent of approximately 345 million Euro — is being transferred to Nepal from the Gulf states. That is why the economic impact is significant, and for the new government in particular, the situation of Nepali migrant workers certainly poses a special challenge. Only if jobs can be created in the tourism sector, in sustainable energy and agriculture, and in digital services will Nepal’s economy be able to grow even without remittances.

But economic growth in Nepal demands political change. In the past, several governments have too long relied on remittances as part of the GDP. The new government will have to meet the expectations of one of their most important voters’ group: Nepal’s young, digitally connected population. Young, mobile and well-educated Nepalis have for decades been among those who saw themselves forced to leave the country and look for work elsewhere. And although they have reshaped the political landscape since the Gen-Z movement in September 2025, they continue to face an economic situation that leaves them with little hope of a good career advancement or a well-paid job in their own country, so most of them leave in search of better opportunities elsewhere. They are not going abroad because they want to explore the world. They are leaving because they feel that they have no other choice. This is by no means an isolated case anymore, but a nationwide trend.

The effects on everyday lives

Being so dependent on remittances poses a huge problem as soon as this system is disrupted by external conflicts – like the ongoing war in Iran. As a result of this current war, there are disruptions in the supply chain for food and other consumer goods, domestic and international travel is affected, and consumers suffer from the negative impacts on their daily lives. Pressure on foreign exchange reserves is mounting to cover rising import costs, which in turn weakens national currencies and exacerbates inflationary problems. Nepal relies on the Gulf states not only as a source of labour (around 80,000 Nepalis are at risk of losing the job in Saudi Arabia following the suspension of the ambitious ‘Future City’ Project) but also for key imports, including raw materials, fertilizers, and construction materials. The war is already affecting industrial production in Nepal and poses a risk to food security as well.

Even more crucial, however, is that this has a massive impact on the women and families who depend on the money sent to them by relatives working abroad. How to pay for education, school fees and the every day live expenses? How to manage a family depending on remittances? Furthermore, the situation of marginalized groups is particularly dire. Rising prices pose a particular threat to poorer people, who, if the crisis persists, will no longer be able to afford food, let alone fuel or gas and other goods.

Long history of Nepalis working abroad

The numbers of Nepalis working abroad increased after the mid-1990s when Nepali politics was shaped by the Maoist insurgency and the economy by neoliberal thinking. The riot lasted for 10 years and came to an end in 2005/2006. But even after the end to the armed insurgency, Nepal did not make any changes in economic policy. In contrast, it followed the revenue-based approach rather than a production-based policy.

The remittances have also increased Nepal’s consumer market and therefore the size of Nepal’s middle class. But remittances do not have a sustainable future at a time when world politics is facing multiple crisis. Likewise, the remittances have led to the growth of consumerism without production.

Previous Nepalese governments have placed little importance on job creation. In contrast they began signing labour agreements with as many countries as possible and have created their own political economy ecosystem in the country. Yet the war in the Middle East and perpetual political instability in the region is putting heavy pressure on Nepal’s economy in general and for their young generation in particular. Many migrant workers who have been working particularly in the golf states are returning back and those who are still there are also not really getting employment or some form of protection.

High expectations on the newly elected government

Nepal recently has elected a new government. This government has promised to speed up service delivery, usher in good governance, and create economic opportunities within the country. It has come up with an ambitious 100-point programme which, if implemented, can transform Nepal for the better. In principle, the new government intends to reverse the exodus by creating jobs domestically, as well as by providing further training and skills development for migrant workers. But the Iran crisis has already stalled the process and priorities are shifting. Today, it is more important than ever for the government to address the needs of returnees and, beyond that, to tackle the everyday problems faced by the population. If people keep on returning, this will put pressure on the government and the labour market and might lead to another political crisis in Nepal.

The future is yet not predictable, but the deep effects on Nepal’s economy, for the new government and society, are already significant.

Chandra Dev Bhatta works at the FES Nepal Office and frequently comments on Nepalese politics, geopolitics and regional political dynamics.

Sarah Klaussner is a Cultural Scientist and the Country Director of FES Nepal Office.