Q3 Monetary Policey Review

Inflation remains at 5 percent

Published On: June 8, 2017 01:10 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 8: While Nepal Rastra Bank (NRB) has aimed to contain annual average inflation below 7.5 percent in the current fiscal year, prices rose at an average of 5 percent in the three quarters of the current fiscal year. 

Releasing the Review Report of the Monetary Policy for the 3rd Quarter of the Current Fiscal Year, the central bank said that it anticipates the inflation to remain below its target. 

The central bank has attributed the base effect, low international inflation, and easing supplies to the slowdown in inflation rate in the current fiscal year. The inflation, as measured through consumer price index, rose 3.8 percent year-on-year in Chaitra (mid-April), according to the report. 

The central bank did not make any change on the monetary policy in the review for the third quarter. 

Beginning from this fiscal year, the NRB has started quarterly review of the monetary policy.  Earlier, it used to do only mid-term review. 

It also said that there is also improvement in the imbalance between the deposit and loan growth seen in the mid-term of the current fiscal year. 

Noting that the broader economic outlook of the country was positive, the central bank has said that there was a need to increase capital expenditure and the pace of budget execution, and expedite reconstruction works to achieve sustainable economic growth. 

There is a high treasury surplus at the moment, which, in part, has led to an imbalance of deposit and loan mobilization in the second and third quarter of the current fiscal year. “

"It is expected that this problem will be gradually resolved after the central bank issued counter cyclical policy, spending due to the local level polls and capital expenditure in the fourth quarter and the credit will be expanded toward productive sector as well as the lending will slow down in real estate, share, overdraft and hire purchase sectors," the quarterly review report added. 

Most of the macroeconomic and financial indicators are on the positive direction, according to the NRB. There has been improvement in price and liquidity situation, while the imbalance between deposit and credit mobilization is also getting narrowed down, read the report. 

Money management could be a challenging task for the central bank due to combination of the huge cash surplus of the government and slowdown in remittances which is likely to have adverse impact on financial resource mobilization, the report added. 

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