NRB Governor defends a ‘liberal’ Monetary Policy

Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari has said the Monetary Policy for the current fiscal came with a review of the overall existing scenario of the nation’s economy.

“The Policy prioritises a liberal approach in terms of the interests of bank loans when most of banks in the world adhere to the tight policy,” he said.

In his address to the post-Monetary Policy discussions organised by the IBN Media here today, the Governor argued that there was a compelling ground to opt for a liberal economic policy. The interest rate has been lowered from 7 percent to 6.5 percent.

This liberal policy was taken upon analyzing the prevailing situation. One of the contributing factors for this reduction is the ease in liquidity, according to the Governor who said the Monetary Policy also aimed to uplift the real estate industry.

He went on to say the Monetary Policy aims to keep the rise in FFIs credit to the private sector within the limit of 11.5 percent and limit inflation to 6.5 percent by pursuing 6 percent economic growth.

Stating the NRB has set a target of recording credit disbursements worth Rs 562 billion and this target is not determined by the ambitious mindset, he said instead it is based on the analysis of monetary indicators.

As he claimed, this figure is calculated based on the improvement in liquidity, reduced interest rates, the situation of remittance inflow and the programmes to improve expenditure of the government budget.

It may be noted that last fiscal year, BFIs credit to the private sector rose by 3 percent against the projection of 12.2 percent.

As the NRB states, government’s inability for capital expenditure as per the expectations, minimum economic growth and shrinking liquidity were major contributors to discouraging the expansion of credit disbursements.
(RSS)