August 5: Nepal Rastra Bank has indicated that the announcement of monetary policy will be delayed. NRB is preparing to release the monetary policy for the current fiscal year by looking at the priorities and projections of the new government. 

Governor of the central bank Maha Prasad Adhikari said that the monetary policy of the current fiscal year should be made public only after looking at the size, priority and projection of the new government's budget. 

“After the change of government, we have to bring monetary policy based on the priorities and projections of the new government, so we are waiting for it,” he said at a meeting of the Finance Committee of Parliament on Wednesday (August 4). 

He said that the preparation to announce the monetary policy is almost complete. However, as the government has changed and the monetary policy will be finalised only by looking at the plans and priorities of the new government, added Adhikari. 

In previous years, there has never been any delay in announcing monetary policy later than July. However, although the month of July already has passed, Governor Adhikari did not give a concrete answer to the committee about the date of announcement of the monetary policy. 

The then KP Sharma Oli-led government had brought the budget for the current fiscal year through an ordinance on May 29. It has been three weeks since the budget brought by the then government was presented to the parliament by the current finance minister Janardan Sharma but the budget ordinance has not been discussed in the parliament. 

The Parliament Secretariat has not yet made an agenda to discuss the budget proposal registered in the Parliament. There is a provision that if the ordinance is not passed within 60 days of its submission to the parliament, it will be automatically repealed. There is a possibility that the budget ordinance will be repealed as this government has not shown much desire to implement the ordinance brought by the previous government. 

The government led by Sher Bahadur Deuba, formed with the support of the five-party alliance, has been under pressure to bring a new budget by scrapping the budget brought through ordinance. Confusion over the budget has had an impact on monetary policy. 

According to Adhikari, the monetary policy, which is currently being prepared, will be improved on the basis of the current policy and priority of the government. 

The upcoming monetary policy will continue to provide concessions to coronavirus-affected areas and businesses, and with the possibility of third wave of coronavirus, the government will continue to prioritize concessional loan to prevent and control the disease and to sustain business. In the monetary policy that will be made public in a few days, NRB will continue the restructuring and rescheduling of loans. 

"Monetary policy needs to facilitate pandemic-affected areas and businesses," he said, “The second wave of Covid-19 and the impact of the prohibitory order on the businesses need to be addressed and the renewal and restructuring of loan should be continued on the basis of the impact.” 

At present, NRB is disbursing refinancing for various sectors up to Rs 200 billion, five times from its average fund of Rs 40 billion. The continuation of refinancing is being given to the areas directly affected by Covid-19 in the monetary policy. 

NRB is ready to control the import of luxury items to reduce the trade deficit and balance of payments. 

For this, NRB will stop the import of luxury items and will pursue the policy of providing credit to the businesses that have come into operation for import substitution through monetary policy. 

As the development strategy of the financial sector and the fourth strategic plan of the Nepal Rastra Bank have to be prepared in the current Fiscal Year, the NRB will give priority to the monetary policy for the sustainable and inclusive development of the financial sector. 

According to the governor's office, so far 20 percent of the loan has been provided to the business sector. A study by NRB has shown that a large amount of loan has not gone to the stock market. 

Governor Adhikari said that the profit was higher even after setting the interest rate threshold of microfinance at 15 percent. He did not elaborate on what the forthcoming monetary policy would do to this unnatural profit growth. 

He said that the profit of the banks was satisfactory. Despite the government's support for concessional loans, many banks have not been able to enter the market as they do not want to take risks. 

At the meeting of the Finance Committee, Chairman Krishna Prasad Dahal suggested NRB to bring monetary policy to strengthen the country's economy even if the debtors above 10 million are not given concession in interest rate. He also said that the country's economy would collapse if loans were provided to big industrialists at concessional rates. 

In the meeting, the members of the committee expressed their concern over the growing trade deficit and drew the attention of Nepal Rastra Bank to find ways to reduce it. Committee member and former finance minister Barshaman Pun warned to stop import of luxury items to reduce trade deficit. Committee member and UML parliamentarian Metmani Chaudhary had said that the monetary policy should not be delayed. 

The Finance Committee is preparing to give recommendations for the monetary policy in a few days. Committee Chairman Krishna Dahal said that the work of preparing the report has already started.