Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari has said that coordination between the fiscal policy and the monetary policy is necessary.
He said this while speaking at a workshop on the current challenges and future solutions of the economy organized by the Authorized Union of Civil Service Employees Nepal of NRB on Monday. Governor Adhikari said that in order to make the country’s economy viable, the government and the market expect more from the monetary policy than from the fiscal policy. He clarified that although the government expects a lot from the monetary policy, it cannot meet all the expectations due to the limitations of the monetary policy.
He said that just as there are checks and balances in the political system, monetary and fiscal policies are also necessary. Governor Adhikari said that the country’s economy is dependent on remittances. He mentioned that due to the policies and regulations in the banking and financial sector, this year will be easy in the external sector, but the future will be challenging. He said that the biggest challenge for the government to bring the economy to normal is in the financial policy. Governor Adhikari said that there is a need for the government to increase revenue collection, increase the scope of taxes and improve customs. He said that the country is lagging far behind in the development of the industrial sector and should implement the Public-Private Partnership (PPP) model of the industrial sector announced by the government.
He said, “Nepal’s economy has different characteristics. The NRB is repeatedly raising issues of structural reforms. The country is dependent on some economic issues. Independence requires some degree of interdependence. Self-reliance may be a bit of a problem in the context of globalization. But there are certain things about Nepal that depend on other countries. There is a tendency for our domestic production to decrease and to depend on foreign production. When our economic policy also depends on imports, the government has to touch upon structural issues. When it comes to political change, the country has lagged behind in economic change. The country’s economy is largely dependent on remittances.”
He further added, “Although this year is comfortable in the external sector, there are challenges for the future, even though it has been successful due to policies and regulations in the banking and financial sector. Nepal Rastra Bank has been proactive in meeting the challenges. We see higher expectations from the government and society on monetary policy. Monetary policy has its limits. Attempting to do more than the purpose and objective of monetary policy of the NRB is beyond the purpose. There is a need for coordination between fiscal policy and monetary policy. Monetary policy also requires policy autonomy. Just as there is a need for checks and balances in the political system, so is the need for monetary and fiscal policy. For that, the government needs to increase revenue collection, increase the range of taxes and improve customs. The country is far behind in the development of industrial sectors. Although 8/9 industrial sectors have been announced, no work has been done.”
