"Ministry panel will suggest remedial measures to put the economy back on track"
KATHMANDU, SEPTEMBER 29
Economists have criticised the formation of a 10-member panel by the Ministry of Finance to study banking institutions' increasing interest rate and other financial issues as interference in the Nepal Rastra Bank's working, but the panel Chair Baburam Subedi said it would only do a quick review of financial problems and submit its report.
"Those who say the panel will interfere in NRB's working are wrong because the panel has not been formed to study solely banking and financial institutes' interest rates, but to study overall economic situation and suggest remedies to put the economy back on track," said Subedi. He said the report would be submitted by the line agencies - the ministry, the government, and others.
He said the task force was created after business stakeholders told Finance Minister Janardan Sharma in the Financial Sector Reform Committee chaired by the FM that there should be a small task force to study the problems of the economy and suggest remedial approaches. The panel will have to submit its report in seven days, which finance ministry officials say could be extended if need be.
Critics say that the ministry's move encroaches upon the Nepal Rastra Bank's jurisdiction as interest rates are largely regulated by the country's monetary policy which is determined by the central bank.
Banking and financial institutions have hiked interest rates on deposits and have said that they would increase interest rates on loans from mid-October.
As banks have increased interest rates on fixed deposits by 10 per cent to 12.13 per cent and have reviewed their base rate, interest rates on loans are likely to cross 15 per cent from the next month. Increased interest rates will increase economic woes of ordinary people who have been hit hard by soaring prices of commodities.
Spokesperson for NRB Gunakar Bhatta said interest rates were largely controlled by the monetary policy which is determined by the NRB keeping in mind all aspects of the country's economy. He said the panel formed by the finance ministry also had a representative from the NRB who will put forth NRB's views in the panel meeting.
"What the panel will do is not clear. May be the panel will look into multiple areas before recommending remedial measures," he said and added that the country's depleted foreign currency reserve remained a matter of concern. "Given the economic situation worldwide, we are not in a position to attract enough FDI or grants. On the other hand, we need to bring essential goods from foreign countries and all this has adversely impacted our foreign currency reserve," Bhatta added.
A version of this article appears in the print on September 30, 2022 of The Himalayan Times.
