Former NRB Governor Chiranjibi Nepal has remarked that the newly released monetary policy for the upcoming fiscal year supports the government’s budget and can help achieve the target of seven percent economic growth.
On Tuesday afternoon, Nepal Rastra Bank Governor Dr. Bishwo Poudel released the monetary policy for upcoming fiscal year 2083/84. In past, there was a tradition of bringing the monetary policy only after the fiscal year started. However, since Poudel became Governor, he started a new practice of bringing it before the fiscal year begins.
This new monetary policy also broke another old tradition. It is probably shortest monetary policy in the history of the central bank. Governor Poudel finished reading the entire policy in just 3 minutes and 50 seconds. Now, some people are criticizing Nepal Rastra Bank, saying that the policy did not give anything. But former Governor Chiranjibi Nepal says this monetary policy has come in correct way.
Monetary Policy Supports Government Budget
Former Governor Nepal commented that people are used to listening to monetary policies for hours, so this short policy might feel a bit strange. He said that since we all used to listen to it for an hour, it may look unusual, but this old practice is now removed. However, he also mentioned that some things are still not very clear.
According to Nepal, the current monetary policy is designed to support the fiscal policy brought by government. He said that the central bank has provided a simple ease to the government, and this policy shows people should not expect too much from Nepal Rastra Bank.
Nepal believes that the central bank only wants to play a supporting role through this monetary policy. He explained that the policy suggests the government budget is main medicine, and central bank alone cannot do everything.
Politicians around the world often take credit when the economy is good but blame the central bank when things go wrong, but Nepal says this policy is trying to break that trend.
Through this monetary policy, Nepal Rastra Bank has clearly stated that the government is main actor and the central bank is not everything. They have also mentioned that they will make changes every three months if it is necessary.
In the past, the central bank used to give relief packages that the government did not provide, which made the monetary policy look even bigger than the budget. But Nepal says this is not the case this time. During the Covid pandemic, the central bank was the one giving relief packages, but now the policy clearly shows that the fiscal policy is supreme.
Seven Percent Growth Possible with Eleven Percent Credit Expansion
Former Governor Nepal believes that the 11 percent credit expansion target set by the monetary policy makes the government’s 7 percent economic growth target possible. He explained that since 40 percent of Nepal’s economy is informal, even if there is zero credit expansion, the economy still grows by 3 to 4 percent.
With the informal economy being active, the 11 percent credit expansion will send 6 kharba 52 arba of loans into the formal sector. Because of this, the 7 percent economic growth rate can be easily reached. However, Nepal pointed out that there is some confusion because the policy does not specify which sectors the loans will go to. In previous years, there used to be estimates showing how much money would go to which sectors. He assumes that the central bank might have made these calculations internally this time.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
