“Monetary Policy review brings in scanty measures, which might not be sufficient to address the country’s burning economic problems”
KATHMANDU, May 14: The private sector has cautiously welcomed the third quarterly review of the monetary policy 2022/23, which was unveiled by Nepal Rastra Bank (NRB) on Friday.
The umbrella organizations of the private sector including the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the Confederation of the Nepalese Industries (CNI), the Federation of Nepali Cottage and Small Industries (FNCSI) and the Confederation of Banks and Financial Institutions Nepal (CBFIN) have said that the monetary policy review fails to incorporate measures to address the country’s ongoing economic problems fully. They however hailed limited measures in policy review enforced by the country’s central bank.
This time, the monetary policy, which is one of the important macroeconomic policies, is expected to bring in radical measures to address the economy’s problem at a time when the country is reeling under recession. The government, instead of focusing on utilizing fiscal space, had been pressurizing the NRB to bring forth a massive revision in its policies through the third-quarter review.
Revised interest rate corridor system introduced
Unlike the expectations of the government and the private sector, the country’s central bank has altered only selected policy measures by keeping largely the monetary policy for this year unchanged.
Pawan Golyan, president of the CBFIN, said the third review is positive to some extent. “However, it is not sufficient to address the burning economic problems of the country,” Golyan said.
He added that an increase in the threshold of the restructuring and rescheduling of credit to Rs 50 million from Rs 20 million for small enterprises, along with the new rule for including the debentures also for the credit-deposit ratio are the welcoming moves of the NRB.
Issuing a press statement, the FNCCI said the revised monetary policy might not help largely the mobilization of resources in the market that is reeling under massive slowdown. “While the monetary policy has recognized the major economic problems like increasing credit risks, high inflation and exorbitant interest rates, the policy measures introduced are not adequate,” reads the statement.
The FNCCI has expressed its suspicion that the marginally reduced policy rate might not help reduce the interest rates on bank loans, which are on a higher side. Through the revised monetary policy, the NRB has lowered the bank rate to 7.5 percent from 8.5 percent.
The FNCSI has said the revised monetary policy is positive to address the problems that the small businesses have been facing at present. “But the central bank must focus on effective implementation to realize the outcomes,” reads the FNCSI-issued press release.
The umbrella organization of the small enterprises has blamed the banks and financial institutions for not providing them with subsidized loans although the NRB has maintained the provision in its main policy document. According to the FNCSI, only 147,807 small firms have received credit under this facility as of mid-April.
Likewise, the CNI has termed the NRB’s move as positive for switching to soft provisions from the tightened monetary policy. Although the revised policy could not address the main issues of big and medium firms, it may help the small businesses to get respite largely from the new measures, according to the CNI.
NRB Governor Maha Prasad Adhikari said the central bank has taken prudent measures to prevent the economy from further deterioration. “We have considered flexibility in monetary policy this time to address the stagnation seen in the economy,” he said.
