EDITORIAL: Policy for growth

The monetary policy has tried its best with various measures to address the credit scarcity the country is facing

The Nepal Rastra Bank (NRB), the central bank, on Wednesday made public its monetary policy for the fiscal 2018-19 with a view to prioritising optimal credit mobilisation in the productive sector, stabilising the interest rates in deposit and lending, and modernising the payment system. Leaders of the private sector have welcomed the NRB’s move. The private sector had been calling for stabilising the lending interest rates, easing credit crunch and assuring refinancing facility. These three areas have been duly addressed by the central bank in its monetary policy. The NRB has asked the commercial banks to narrow down the interest rate spread – the difference between deposit and lending rates – to 4.5 per cent by the end of the next fiscal. This is a positive move which will give much relief to borrowers to do business. This measure will help increase up to 20 per cent credit growth for the private sector and will also help achieve the government’s growth target of eight per cent. The central bank has brought down cash reserve ratio of the commercial banks to four per cent. This provision will generate additional Rs 48 billion in the fiscal system which will ultimately help reduce the lending rate. Compulsory liquidity ratio has also been brought down to 10 per cent from 12 per cent for commercial banks, eight per cent for development banks and seven per cent for finance companies.

One of the major steps the central bank has taken is allowing the commercial banks to hedge fund from foreign financial institutions and Indian currency as well. The banks can borrow up to 25 per cent of their core capital in convertible currency and in Indian currency. But such money should be utilised in productive sectors and infrastructure development as defined by the NRB. It has also raised refinancing facility to Rs 35 billion from existing Rs 25 billion to ensure concessional financing in priority sectors. The banks now can borrow such money from the central bank at one per cent and lend it at 4.5 per cent to export-based enterprises. This scheme has been introduced to address the financial crunch the export-based enterprises have been facing for long. The facility is expected to boost export-oriented industries. The central bank has also tried to encourage banks to issue bond/debentures to mobilise resources.

The monetary policy has tried its best with various measures to address the credit scarcity the country is facing. The eight per cent growth target set by the fiscal policy cannot be met unless deposit growth rate, which stands now at 17.6 per cent, is increased substantially. The deposit growth rate can be increased either by increasing export, inflow of remittances, foreign borrowing or bringing in foreign direct investment (FDI). Foreign reserve currency should also be kept in stable condition to attract FDI. Though NRB has allowed commercial banks to borrow money from foreign financial institutions with some riders attached, they will not be able to do so due to high insurance cost of around six per cent. In order to bring the foreign loans, the country should get sovereign credit rating. The central bank has vowed to introduce instruments to hedge foreign borrowing at relatively lower costs of around four per cent.

Family planning

World Population Day was observed in Nepal on Wednesday. The focus of this year’s celebration was reproductive rights to mark 50 years since family planning won recognition as a human right – hence “Family planning is a human right” is the theme. According to estimates, around 214 million women in developing countries have an unmet need for modern contraception. In Nepal, around 1.5 million (24 per cent) married women are still deprived of access to essential modern contraception.

Easy access to modern contraception is not only about birth control, it is also about giving women bodily autonomy and reducing poverty. While there is a need to ensure birth control measures to all married women, there is also a need of constant flow of advice and treatment in the safest and more informed way. Lack of safe and effective family planning threatens women’s ability to build a better future for themselves. This consequently weakens families and communities. Just as family planning is a human right, it is also about women’s empowerment. Family planning gives women a future.