Central bank unveils quarterly review

KATHMANDU, DECEMBER 1: The Nepal Rastra Bank (NRB) recently released the first quarterly review of its monetary policy for fiscal year 024/25. The review provides insights into the country's overall economic condition, highlighting improvements and challenges in key indicators such as inflation, trade deficit, remittance inflows, and foreign currency reserves. NRB emphasized that controlling inflation remains a primary priority for both the government and the central bank. According to the report, consumer inflation stood at an average of 4.26%.

Inflation in the food and beverage sector reached 7.18%, driven primarily by rising prices of lentils, oil, rice, and vegetables. At the same time, inflation in the non-food sector was limited to 3.49%, and price hikes in fuel, housing rents, and transportation signal persistent economic pressures.

NRB data shows that foreign currency reserves are sufficient to cover 14.6 months of imports, an improvement attributed to increased remittance inflows. During the review period, remittance inflows rose by 11.2%, amounting to Rs. 407.31 billion.

The trade deficit improved, narrowing by 4% to Rs. 352.37 billion. However, exports declined by 6.1%, standing at Rs. 38.38 billion, which raises concerns. The decline is particularly evident in the export of textiles, carpets, and herbal products. Import volumes also decreased by 4.2%, contributing to the reduction in the trade deficit.

The lending to the private sector showed improvement, with NRB focusing on microfinance, small and medium enterprises (SMEs), and the tourism sector to enhance credit flow. The report notes a 6.2% growth in private sector credit, which falls short of the annual target of 12.8%. While credit access for the construction sector has improved, small businesses continue to face difficulties in obtaining loans.

NRB has revised key monetary policies, reducing the policy interest rate to 7.0% and lowering the interest rate corridor to 6.5%. The central bank assured that it is actively collaborating with banks and financial institutions to address liquidity issues.

Additionally, NRB is preparing special concessional loan schemes for home construction, small industries, and the tourism sector. The review also draws comparisons with the economic indicators of neighbouring countries, India and China, showcasing some positive trends in Nepal’s economy.  In 2024, India’s growth rate is projected at 7%, China’s at 4.8%, and the global economy at 3.2%.

NRB reaffirmed its commitment to implementing monetary policies in alignment with government strategies, emphasizing measures to control inflation, create jobs, and ensure sustainable economic growth.

While the review highlights signs of recovery in the economy, it also calls for vigilance in addressing persistent challenges. Declining exports, sector-specific inflationary pressures, and below-target credit growth underscore the need for intensified efforts to achieve sustained economic stability.

 

 

 

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