Liquidity crunch won't be solved without ensuring that money withdrawn returns to the banking system: Khatiwada

KATHMANDU, July 30: Former Finance Minister has said that the problem of liquidity crunch will not be solved unless some measures are introduced to encourage depositors to not withdraw their money from the banking system. 

Addressing a program organized by the Industry Organization Morang on Friday, Khatiwada, who is also former Governor of Nepal Rastra Bank, said that the money withdrawn in the name of opening LC to import goods must have been misused to export the same goods to the third country through illegal channels. He argued that such practice has caused the banking system in Nepal to face a liquidity crisis.

Khatiwada mentioned that the money lost from the banking system should be returned within six months at the most. However, as the money is not coming back, the liquidity crunch is only getting worse. "The faster the money that went out of the system returns to the system the faster the problem of liquidity crisis is solved,” he said.

Also addressing the program, senior leader of Nepali Congress (NC) Dr. Minendra Rijal said that industrialization could not take place in Nepal due to the inability of domestic producers to increase competitiveness of Nepali products. “Most of the industries in Nepal continue to add value to the imported raw materials and sell them. Unless domestic raw materials are used, there will be no major improvement in the economic condition of Nepal,” he said.