Kathmandu, December 9

The government is doing the groundwork to bring rehabilitation package for businesses and industries that have been badly affected due to the border blockade and Tarai protest.

The guideline for the rehabilitation fund is in the last leg and once it comes into enforcement, Nepal Rastra Bank (NRB) will extend refinancing facility at subsidised rates for specific sectors identified by the guideline, according to NRB Governor Chiranjibi Nepal.

It is reported that the government plans to set up rehabilitation fund amounting to Rs 100 billion.

Governor Nepal expressed hope that the rehabilitation package would be instrumental in coping with the growing frustration in the private sector.

Speaking at an interaction programme titled ‘Blockade and its impact on banking sector’ jointly organised by Independent Business News Media and Research and Nepal Bankers’ Association here today, the governor expressed concerns over the parallel economy that has flourished with the smuggling of fuel and daily essentials because of supply disruptions from India.

“Unless the government is able to streamline the supply at the earliest, such illegal activities will ultimately squeeze the formal economy.”

Stating that the central bank is bracing for the daunting task of controlling inflation to a single digit, he further said, “The price of food and non-food items have skyrocketed due to higher costs of production and transportation.”

In its monetary policy, NRB had said inflation this fiscal would likely hover around 8.5 per cent owing to the higher amount of money supply due to reconstruction-related activities in addition to the regular development works. However, despite nominal capital expenditure and less flow of credit from banks, the inflationary pressure has surged due to higher production costs that have posed a threat to push the economically vulnerable communities below the poverty line.

In the programme, Nepal Bankers’ Association President Upendra Poudel sought support from the central bank to facilitate the borrowers. He sought further extension in repayment period of term loan. “Otherwise, the amount that needs to be provisioned for loan-loss would be higher in the second quarter balance sheets of banks and financial institutions.”

Likewise, Shankar Pandey, chair of Banking Committee at Federation of Nepalese Chambers of Commerce and Industry said that each and every sector of the economy has been affected due to border blockade. As per him, 2,200 industries in the Tarai region have already pulled down their shutters. Even industries in other parts of the country have been forced to run below capacity and the capacity utilisation of industries currently stands at 20 per cent on an average due to scarcity of raw materials and labour, according to him.

He further suggested the government to introduce stimulus packages without delay to revive the economy, which is on the brink of collapse.