Banks must reduce interest rates to achieve the target of credit growth by 11.5 per cent
Nepal Rastra Bank (NRB), the central bank, unveiled the Monetary Policy for the fiscal year 2023-24 on Sunday, giving some relief to the banks and financial institutions, home and auto loans, and dollar facility to Nepali citizens visiting foreign countries other than India. However, the business community and bankers have expressed skepticism over its implementation as guidelines to the changes made in some areas have yet to be made public. The central bank has dropped the policy rate while keeping the mandatory cash ratio and the statutory liquidation ratio of banks and financial institutions intact.
Economists have pointed out that the ratio of credit flow to the private sector, including their financial assets, is higher than that of the country's economy. Although some policies related to cooperatives and investment of external funds by banks have been made flexible along with the decrease in interest rates, it is still unclear whether or not the Monetary Policy can achieve the expected outcome and support economic growth of 6 per cent as envisaged by the fiscal budget. The Central Bank's policy of credit expansion at 11.5 per cent does not seem to be realistic given the low morale of the private sector.
The Monetary Policy seems to be balanced considering the global uncertainties and rise in the country's fiscal deficit. It is expected to adjust the slowdown seen in the economy. The policy related to working capital, such as home, auto and margin loans is expected to ease the stalled processes faced in the past. One of the notable changes the Monetary Policy has brought about is to establish a separate regulatory body to regulate cooperatives as announced by the government in the current fiscal budget. A regulatory body was necessary to regulate the cooperatives, which have gone out of control, leaving thousands of depositors in the lurch. The policy has also increased the limit for taking out home loans from Rs 15 million to Rs 20 million. Nepali citizens visiting foreign countries other than India will be provided upto $2,500 twice a year.
However, the hotel and hospitality industry appears to be unhappy with the Monetary Policy, which they said, failed to address their problems. They have said the high interest rates of banks have made it difficult to run their business although the hotel and hospitality sector has contributed the most to foreign currency earnings after remittances. The Monetary Policy's decision to allow upto Rs 2.5 million for auto loans is a positive sign although this kind of relief will primarily benefit the entry-level automobiles. Those engaged in the share market, auto and real estate are to some extent elated by the Monetary Policy, which had remained tight since the outbreak of the COV- ID-19 pandemic in 2020. The target of expanding credit growth by 11.5 per cent, which amounts to Rs 600 billion, could be challenging. How can the credit growth be achieved when the government itself has not been able to spend more than 60 per cent of its capital expenditure? The confidence level of the private sector must be enhanced to achieve the credit growth target. For this to materialise, banks and financial institutions must first reduce their interest rates in all economic sectors, while placing special emphasis on the growth of agriculture.
KMC's waste
It's been a week since the locals at Bancharedanda have been obstructing Kathmandu municipal trucks from carrying garbage to the landfill site. The government even had to deploy the Armed Police Force last week to take the garbage to there, although this is no solution to the problem. Until the locals cooperate, this problem of Kathmandu's waste disposal will keep on recurring. The locals complain it is impossible to live near the landfill site because of the stench and haphazard disposal of waste by Kathmandu Metropolitan City (KMC). KMC claims it has poured in crores of rupees in the education, health and social welfare of the locals for allowing it to dispose of the garbage there.
Although the road leading to Bancharedanda has been pitched, a section of the road leading to the landfill site is a mess. So the responsible authority should take care of this problem immediately. Meanwhile, KMC should think of ways to manage the 1,200 tons of garbage the valley generates in the city itself.
Stockholm in Sweden doesn't have a landfill site but burns all of its municipal waste to generate electricity.
Nepal now manufactures such machines, which could be installed in the different wards to take partial care of the waste locally.
A version of this article appears in the print on July 25, 2023, of The Himalayan Times.
