Monetary policy will align with the budget: Governor Adhikari

KATHMANDU: Nepal Rastra Bank (NRB) Governor, Maha Prasad Adhikari, has said that the Monetary Policy for Fiscal Year 2023/24 would align with the budget policy.

“Preparations are underway to release the monetary policy next week,” Adhikari said, during a meeting of the Finance Committee of the House of Representatives. “The primary focus of the monetary policy would be to achieve the economic growth targets set in the budget, control inflation, and manage the external sector.”

Stating that while there are some positive economic indicators such as a balanced external sector, decreasing interest rates, and adequate liquidity, Adhikari said challenges like inflation, a deficit in the reserve fund, and sluggish credit expansion still exist. “The permissible limit of inflation for the previous fiscal year was 7%, and it remains above this in the current fiscal year. The reserve fund is in a deficit of Rs 193 billion. Despite good deposit collection, credit expansion has decreased,” Adhikari said, mentioning that the external sector appears more facilitating compared to the previous year.

Adhikari also said that the central bank would take appropriate decisions to keep the economy in sound health. “However, the monetary policy alone cannot resolve all the current problems, which include a slowdown in real estate, revenue collection challenges, and difficulties in achieving the capital expenditure target. The central Bank will use whatever instruments it has at its disposal to address these issues.

According to the NRB, interest and base rates of loans and deposits are decreasing, and the CD ratio has dropped to 82%.

Since the government has set a target of keeping inflation within 6.5% percent in the current fiscal year, we will mobilize monetary instruments accordingly, he added.