KATHMANDU, MAY 27

The Nepal Rastra Bank has hinted at the possibility of tightening of the monetary policy in the future.

The central bank, unveiling the third quarter review of the Monetary Policy 2021-22, has said given continuity to the guidance of the mid-term review as the pressures on price and external sector stability remain.

'However, in case the country witnesses additional inflationary pressure and further depletion of the foreign exchange reserves, the policy guidance can be tightened.'

The latest macroeconomic update report of the central bank had revealed that based on the imports of nine months of 2021-22, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 7.4 months, and merchandise and services imports of 6.6 months.

Moreover, the NRB has indicated that it would reduce the refinancing limit. 'The refinancing facility provided by the central bank for the revival of industries and businesses affected by the COVID-19 pandemic will be limited to the most affected sectors that are yet to be revived.'

The outstanding amount of refinance provided by NRB remained at Rs 1,16.90 billion in mid-April, 2022.

The NRB has also said that it will mobilise selective financial instruments to reduce internal and external pressures and for overall financial stability.

While it has retained the cash reserve ratio, statutory liquidity ratio, banking and refinancing rates, the central bank has mentioned that emphasis will be given to ramp up the flow of financial instruments in the productive sector, small and medium enterprises, for growth of domestic production and export promotion, considering the price and external sector stability.

A version of this article appears in the print on May 28, 2022, of The Himalayan Times.