Finance Minister Dr Prakash Sharan Mahat has underlined the need of a liberal monetary policy for the acceleration of economic activities.
Taking part in a discussion on "Nepal's economic situation and upcoming monetary policy", the Finance Minister said the economy would be vibrant if the issue of policy rate was addressed during the determination of a monetary policy for the upcoming fiscal year.
A liberal policy is capable of making the economy vibrant, according to the Finance Minister. "The liberal economic policy brought targeting the recovery of economy after COVID-19 pandemic was tightened being based on external economic issues. The same move has led to issues in domestic economic setting."
He took time to insist on the collaboration between the Finance Ministry and the Nepal Rastra Bank to promote the nation's economy.
As he said, the government wished the NRB to function independently and make efforts for the improvement of overall economy. There should be coherence between the finance policy and monetary policy to operate the economy effectively.
He took time to claim that the government's fiscal policy emphasized on the economic improvement. "At the moment, capital flow is limited due to a high cost, preventing the economy to catch its vibrancy."
"The government prioritizes fiscal discipline," he said adding that it had controlled the unnecessary budget transfer.
According to him, the government is upcoming of achieving the target of six percent economic growth in the upcoming fiscal year.
House of Representatives member Metmani Chaudhary stressed on promptly identifying the present problems in the economy and resolving them. "Nepal's economy is headed towards a serious condition. There is a need for reviving it and it is necessary to identify the underlying problems- whether that is related to intention or policies – for that," he said.
Lawmaker Chaudhary, who is also the president of the Economic Discussion Forum, also said the suggestions collected for the Monetary Policy for the upcoming Fiscal Year 2023/24 would be submitted to the Nepal Rastra Bank.
Economist Dr Dilliraj Khanal viewed that problem in the banking and fiscal sector would result in problems in the entire economy. "Although the economy is on the path to improvement, it is still in crisis. The liquidity has increased at present. However, the loans have not expanded. The lending by the banks and financial institutions have not extended their loans in the productive sectors." he added.
Stating that we brought an extension oriented monetary policy for the post-Covid recovery, he said that was required, but it could not produce the expected output later on.
According to him, the inflation is seen in the market as the investment has not been higher in the small, medium-scale and productive sectors. Economist Khanal said problems like investment in the unproductive sectors, limited big business houses using a large chunk of loans on concessional basis, cooperatives becoming problematic, among others are seen in the financial sector and these needed to be improved.
Economist Dr Chandrakanta Adhikari said the results of the sector-wise loans could not be seen in the GDP. "The contribution of agriculture, hydropower and other sectors to the GDP is minimum compared to the amount of loan issued to these sectors," he pointed out.
Former banker Anal Raj Bhattarai said the market demand has contracted at present and stressed that the Monetary Policy for the upcoming fiscal should be able to create an environment conducive for the private sector business.
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