KATHMANDU, AUGUST 4
Finance Minister Dr Swarnim Wagle on Tuesday called for amendments to the Nepal Rastra Bank (NRB) Act, saying the changes are necessary to make the central bank more proactive, effective and accountable while strengthening coordination with the government on economic policy.
Addressing a meeting of the House of Representatives' Finance Committee during clause-by-clause deliberations on the bill to amend the Nepal Rastra Bank Act, 2058 (2002), Wagle said fiscal and monetary policies are closely interlinked in Nepal and require effective coordination between the Ministry of Finance and the central bank.
"In a country like Nepal, fiscal and monetary policy are like two wheels of the same cart. The Ministry of Finance handles fiscal policy, while the central bank manages monetary policy. Coordination between the two is essential," he said.
Wagle backed the proposal to maintain a minimum seven-member NRB Board of Directors and argued that the finance secretary's presence on the board would become even more important if the provision allowing the government to issue direct instructions to the central bank is removed.
The finance minister also said Nepal's fixed exchange rate regime with the Indian rupee limits the central bank's ability to pursue a fully independent monetary policy, adding that imported inflation further constrains the effectiveness of monetary tools.
Referring to the economic concept of the "Impossible Trinity", Wagle said no country can simultaneously maintain a fixed exchange rate, free capital movement and complete monetary policy independence. He said Nepal has opted for exchange rate stability while regulating capital flows, allowing only limited autonomy in monetary policy.
On the proposed institutional reforms, Wagle said the central bank does not require three deputy governors, arguing that two would be sufficient given the existing executive director structure.
He also called for clearer eligibility criteria for board members, including explicit provisions allowing professionals with executive-level experience in international financial institutions to serve on the board. He said the term "executive level" should be clearly defined to avoid ambiguity.
The finance minister further stressed that the NRB board should include experts from diverse fields, including economics, monetary policy, banking, finance, management, public administration, law, statistics and mathematics, to strengthen governance at the central bank.
(With inputs from RSS)