KATHMANDU: The central bank has extended the period of reserve repo from 28 days to 45 days to make the liquidity management more effective. Though it has not changed the CRR, it has relaxed the Statutory Liquidity Ratio (SLR) a little, in the mid-term evaluation of the Monetary Policy.

It has also provided refinancing facility for banks — on collateral at an interest rate of 7.5 per cent to promote export industries. However, it is still debatable that the tool the central bank used will be effective in boosting exports or increase inflation.

Most importantly, the million dollar question is will it be able to help the export sector by encouraging the manufacturing sector with refinancing at a time when there is political insability and difficult management-labour relations that have spoiled the industrial environment.

The Monetary Policy been a singular failure in curbing the price hike and maintaining fiscal stability — key aims of the monetary policy. However, it is adhering to the skeleton of the policy.

According to mid-term evaluation, the Monetary Policy will allow A-class financial institutions to mobilise institutional resources from international markets to help in liquidity management. The marginal lending in LC for imports has been raised to discourage unnecessary import.

The central bank revealed that inflation stood at 11.8 per cent in the last six months, though it had promised to keep it at around seven per cent. In the corresponding period last year, inflation was 14.4 per cent.

For the first time, the Monetary Policy has been presented by a spokesperson of NRB instead of the governor himself. Tradition dictates that the mid-term budget evaluation be presented by the Finance Minister and that the mid-term Monetary Policy evaluation be presented by the governor himself.

The mid-term evaluation has also no consistency as some of the data are from eight months ago, some from seven months ago and some from six months ago. The central bank does not seem serious about the gravity of the situation.

According to the Monetary Policy, in the first seven months of the fiscal year trade deficit grew by 59.9 per cent. By end of Falgun, NRB had a foreign currency reserve worth Rs 185.94 billion. The bank has a forecast of four per cent of GDP in the current fiscal, which also seems to be untrue.