As the central bank is likely to unveil new monetary policy for the fiscal year 2007/08 later this month after the budget announcement, bankers and economists debated the contours of the policy at a programme held in Lalitpur on Friday.
Speaking at a programme on “Review and Pre-Discussion On Monetary Policy” organised by Independent Business News (IBN), acting governor of the central bank KB Manandhar hinted that the forthcoming monetary policy will not change the existing foreign exchange pegging regime anytime soon. Responding to queries raised by bankers, he said the central bank was positive on allowing investment in foreign countries in certain areas, but he said the existing act that prohibits any kind of capital investment in foreign land needs to be amended first.
Manandhar also hinted that the central bank could provide some subsidy on Cash Reserve Ratio to the commercial banks who open branches in remote areas.
Earlier, Radhes Pant, president of Nepal Bankers’ Association (NBA), spelled out a number of suggestions for the Nepal Rastra Bank (NRB) including providing ways to let the excess liquidity be utilized in investment in foreign countries; facilitating commodity exchange practice; and strengthening the central bank’s supervision and monitoring capacity.
“The policy should also pay due attention towards controlling inflation,” he said, adding that the monetary policy needs to address the issue of setting up Asset Management Company; strengthening Loan Recovery Tribunal; implementing anti-money laundering bill, among others.
He also said that directing commercial banks to serve remote region or poor sections without incentive could be counterproductive to economy.
Dr. Shankar Sharma, former vice chairman of National Planning Commission (NPC), expressed worries about the negative real interest rate.
“We should be careful not to affect the financial sector reforms,” he said.
Hridaya Raj Gautam, managing director of IBN – which produces Artha Ko Artha programme for Nepal Television – said that the programme was a part of series of debates that IBN has been holding with economists and stakeholders on issues that affect the national economy.
Gokarna Raj Awasthi, programme producer of IBN, highlighted the salient features of the macro-economic situation in the country.