At a time when Finance Minister Dr. Prakash Sharan Mahat is publicly assuring that all the problems seen in the economy will be addressed through monetary policy, Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari has stated that the monetary policy has its limitations and cannot address all the economic issues with its limited tools at its disposal.
Speaking at a parliamentary Finance Committee meeting on Thursday, the NRB governor pointed out that the current economic issues are the outcomes of the slowdown in the real estate business, low revenue collection, and the government’s failure to execute capital expenditure. However, Adhikari said that the monetary policy for the next year will be issued to complement the annual budget.
Adhikari said the NRB will be issuing the monetary policy for the fiscal year 2023/24 next week. According to him, the central bank formulating monetary policy is challenging as in the time of coronavirus impacts.
According to the NRB, there is liquidity worth Rs 88.5 billion in the banking system. The current accounts suffer a deficit of Rs 70 billion, and the banks are having a tough time to recover loans due to the market slowdown. As of mid-June, a total 147,510 people had taken concessional loans.
The NRB governor said the monetary policy would focus on achieving economic growth as per the budget target, controlling inflation and managing the external sector, trying to address current economic issues. “This time, the NRB cannot be lenient in its policy tools because of the existing economic problems of the country.”
While a number of lawmakers expressed their concern for the NRB to take necessary measures to boost the real estate business and stock exchange market, former finance ministers urged the central bank to adopt coordinated policies in Thursday’s meeting.
The NRB has been facing criticism that the current economic problem is an outcome of the deviation between the fiscal policy and the monetary policy issued for the last fiscal year. Finance Minister Prakash Sharan Mahat in different public forums has been stating that the NRB should make the monetary policy to address the most of the economic problems seen at present.
Lawmaker and economist Swarnim Wagle said there are problems existing in both public finance and private finance. “In this context, monetary policy alone should not be overloaded to fulfill all the expectations of the economy,” Wagle said.
