NRB gearing up to release the Monetary Policy this week

The Nepal Rastra Bank is gearing up to release the Monetary Policy for the Fiscal Year 2023/24 this week, announced Governor Maha Prasad Adhikari.

The upcoming monetary policy aims to align with the budget target by prioritizing economic growth, inflation control, and effective management of the external sector, Governor Adhikari stated.

While the nation has seen some positive economic indicators, such as a balanced external sector, declining interest rates, and adequate liquidity, certain challenges persist. Notably, inflation has remained above the permissible limit set for the previous fiscal year, with a current deficit of Rs 193 billion in the reserve fund. Furthermore, credit expansion has been sluggish, despite the successful accumulation of deposits.

Governor Adhikari remarked, “The permissible limit of inflation for the previous FY was seven percent, and it remains above that this FY. The reserve fund is in a deficit of Rs 193 billion. The credit expansion has decreased despite good deposit collection.”

On a more positive note, the external sector appears to be performing better compared to the previous year. Governor Adhikari noted, “Now, there is liquidity worth Rs 88.5 billion in the banking system. The current accounts suffer a deficit of Rs 70 billion, and there were difficulties to recover loans due to the market slowdown.”

Up until June 15, 2023, a total of 147,510 individuals have taken concessional loans, signaling some level of economic activity in the country.

In light of these economic circumstances, the Central Bank is committed to making appropriate decisions to strike a balance in the nation’s economy, Governor Adhikari added.

According to the Nepal Rastra Bank, interest and base rates of loans and deposits are on a downward trend, and the Credit-Deposit (CD) ratio has dropped to 82 percent.

The government has set a target of keeping inflation within the permissible limit of 6.50 percent for the current fiscal year, and the Central Bank plans to utilize monetary instruments accordingly to achieve this goal.