Call to make Monetary Policy more effective

Kathmandu, July 30:

A macro-economic report prepared by Nepal Rastra Bank (NRB) based on 11 months’ data till mid-June 2008 shows inflation at 11 per cent. The business sector is worried that the Monetary Policy (MP) won’t be able to tackle inflation.

Addressing a programme on ‘Monetary Policy’ organised by Nepal Chambers of Commerce (NCC) here today, finance secretary Rameshwor Khanal said, “The double digit inflation is because of rise in cost of production.” He admitted that MP might not be able to check inflation.

Entrepreneurs complained that the last Monetary Policy had not been able to fulfil its commitments. The domestic market was bearing the brunt of rising food and oil prices in the global market, said NCC president Surendra Bir Malakar. “The monetary policy’s major task is to contain inflation,” he said. However, it has been only seven years that NRB, the central bank of Nepal, started bringing Monetary Policy after the annual budget.

“Export Trading House and Pre-export Credit are some of the other important issues that MP needs to address apart from Mutual Fund,” Malakar added.

Good governance and MP are interrelated and as such the success and failure of MP depends on good governance, he said.

Taking a cue from last year’s mistake of keeping petroleum products’ prices stable, NCC urged that these needed to be revised according to the market. The chamber also suggested that micro-finance, micro insurance and bridging the interest spread are other important aspects that MP needed to address. Change in supply, availability and cost of money and interest rate could tackle stagflation, NCC said.