KATHMANDU, JULY 24
The private sector has expressed dissatisfaction with the Monetary Policy announced by Nepal Rastra Bank for the fiscal year 2023-24, stating that it is inadequate to address the prevailing economic challenges.
Issuing a joint statement, Confederation of Nepalese Industries (CNI), Federation of Nepalese Chambers of Commerce and Industry (FNCCI), and Nepal Chamber of Commerce (NCC) have called for the central bank to reconsider and make necessary amendments to the Monetary Policy to better address the economic challenges facing the nation.
The private sector umbrella bodies have outlined various issues with the Monetary Policy, including high interest rates, weakened demand, cash flow problems, declining production, rising unemployment, reduced private sector confidence, and stalled investment plans. They argue that the measures introduced by the central bank to rejuvenate the ailing economy are insufficient, particularly given the tight provisions in the policy.
One of the main concerns raised in the statement is the downward revision of the credit growth target for the private sector. The target of 12.6 per cent from the previous fiscal year has been lowered to 11.5 per cent for the current fiscal year, posing challenges in achieving the government's goal of six per cent economic growth through budgetary measures.
The private sector has also expressed disappointment in the central bank's approach for controlling high-interest rates. The policy only marginally reduced the policy rate by 0.5 percentage point, which they argue may not effectively support interest rate reduction. The private sector strongly recommended that the central bank utilise all available tools to lower the base rate of banks.
According to the statement, the private sector had proposed various measures to tackle economic challenges, including reducing loan interest rates, maintaining a one per cent debt restructuring scheme, facilitating loan refinancing, and lowering premiums on interest. However, the Monetary Policy has not accommodated these recommendations, raising concerns about their potential impact on the economy.
While the private sector has welcomed certain aspects of the Monetary Policy, such as the increase in the loan limit for first-time homebuyers and foreign exchange facilities, the CNI, FNCCI and NCC have emphasised the need for clearer and more transparent guidelines for effective implementation.
The private sector believes that the review of working capital loans could enhance market confidence. However, they have urged the central bank to provide more clarity in this regard.
A version of this article appears in the print on July 25, 2023, of The Himalayan Times.
