Considering the possibility of achieving the government’s target of 7 percent economic growth for the fiscal year 2083/84, Nepal Rastra Bank announced its monetary policy on Tuesday. In its 25th monetary policy release, the central bank claimed that despite the high economic growth target, it is achievable. “…As a result of the economic reform programs initiated by the government, the investment climate in the private sector has improved, the government’s capital expenditure capacity has increased, and external economic conditions are favorable, it appears that the expected economic growth rate can be achieved,” the monetary policy states.
Governor Bishwanath Poudel stated that the monetary policy was issued with the goal of maintaining overall monetary stability while keeping inflation within the target of 5.5 percent. “To achieve this target, institutional reforms in banks and financial institutions will be implemented to reduce their capital deployment costs and simplify the process of obtaining loans from savers, among other measures,” he said.
The governor also informed that stringent personal guarantees will be required from institutional borrowers for loan management, reducing the number of blacklisted individuals, managing non-performing loans, and introducing new tools for the recovery of distressed loans are proposed. Policies aimed at improving deposit institutions in favor of depositors and preventing excessively high interest rates based on economic circumstances have also been included. “Through this, the monetary policy emphasizes efforts to provide safe savings and easy access to loans at reasonable interest rates for depositors nationwide, including those living in poverty and industrialists,” Poudel added.
For the fiscal year 2083/84, targets of 11 percent loan expansion to the private sector and a 14 percent increase in money supply have been set. Due to supply-related reasons, prices of petroleum products and food items have increased, which will affect inflation to some extent for a few months; however, inflation is expected to decline below the 5.5 percent target from the fourth quarter onward. Existing liquidity and interest rates in the monetary sector are expected to play a positive role in supporting economic expansion.
