Laxmi Capital News
NRB urged for 'expansionary' monetary policy

Stakeholdershave suggested Nepal Rastra Bank (NRB) to bring an expansionary Monetary Policyfor the fiscal year 2018-19 in the backdrop of the country facing the crunch ofinvestment capital.

Citing that the country will requireinvestment of over Rs 500 billion in the next fiscal year to meet its economicgrowth target of eight per cent, they said that an expansionary monetary policywill ensure supply of money in the market and control interest rates – both ofwhich are crucial to achieving economic growth target and keeping inflationwithin the targeted 6.5 per cent rate.

“Amid lack of adequate investment funds, itwill be tough for the government to achieve the targeted economic growth ratein 2018-19. In such a situation, the central bank should draft a monetarypolicy that is as expansionary as possible even if it adds to the inflationarypressure to some extent,” said GyanendraDhungana, president of Nepal BankersAssociation (NBA), at an interaction programmeorganised by NRB today.

Meanwhile, Dhungana also asked the centralbank to look into the possibility of scrapping the credit-to-core capital plusdeposit (CCD) ratio limitation in the banking sector through the monetarypolicy citing that liquidity could be controlled even by maintaining the cash reserveratio (CRR) and statutory liquidity ratio (SLR).

Other private sector representatives at theevent urged NRB to addresses various lapses of the budget that have demoralisedthe business community through the monetary policy.

“Among others, the government’s policy toscrap VAT rebate system on different essential goods and the inability of thebudget to ensure stability in interest rates in the banking sector arediscouraging. The monetary policy should address these bottlenecks of doingbusiness in Nepal,” said ShekharGolchha, senior vice-president of theFederation of Nepalese Chambers of Commerce and Industry.

Kamalesh Kumar Agrawal, vice-president ofNepal Chamber of Commerce (NCC), said that the monetary policy should beexpansionary and ensure production and supply of goods. Similarly, he alsostressed on the need to limit interest rates on loans in banking sector withinnine per cent, redefine productive and non-productive sectors and allow the useof high-denomination Indian currencies in the domestic market.

Meanwhile, Nara Bahadur Thapa, executivedirector of NRB, said that the monetary policy for 2018-19 will basically focuson accelerating the current economic growth momentum, narrowing down tradedeficit, increasing the flow of loan to small and medium enterprises,controlling rising interest rate and increasing people’s access to financialservices.

“The market is already witnessinginflationary pressure and it will likely increase in the next fiscal year. Themonetary policy will be prepared by adopting cautious measures to controlinflation,” said Thapa.

Addressing the event, NRB GovernorChiranjibi Nepal said that the monetary policy will be supportive to thebudget’s target of achieving eight per cent economic growth in 2018-19 andkeeping inflation within 6.5 per cent.

“Nepal has witnessed an economic growth rateof over six per cent for two consecutive years despite political instabilityand frequent changes in government. As the country now has a stable governmentand the supply-demand situation is improving, the eight per cent economicgrowth target in 2018-19 is achievable,” said Nepal

Source: The Himalayan Times, 13thJune 2018

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