"Govt. should avoid overtly rigid or excessively flexible economic policies"

KATHMANDU, JANUARY 5: Economist Rameshwor Khanal, who also serves as the coordinator of the High-Level Economic Reform Commission, has emphasized the importance of adopting balanced policies to effectively manage Nepal's economy. Speaking at the fifth annual general meeting of the Confederation of Banks and Financial Institutions (CBFIN) recently, Khanal criticized the government for failing to maintain policy balance.

“In the past, the government has either implemented overly rigid or excessively lenient policies, neither of which have succeeded in stabilizing the economy,” he remarked. “During challenging times, we opted for overly lenient policies, and in favorable conditions, we enforced excessively rigid policies. Both approaches failed to bring the desired economic balance. Moving forward, the government must avoid these extremes and adopt a balanced approach.”

Khanal also highlighted three key contradictions in Nepal’s economic landscape. First, he noted that while the regulation of banks and financial institutions is highly effective, the volume of non-performing loans continues to rise.

Second, he pointed out the paradox of liquidity in the banking sector. “There is ample liquidity in the banks, and the central bank is absorbing surplus liquidity every week. However, individuals lack liquidity in their hands,” he explained.

Lastly, he observed a disconnect between banks and businesses. “Banks claim there is insufficient demand for credit, while businesses complain that banks and financial institutions are not providing the loans they need,” Khanal said.

He urged policymakers to address these inconsistencies and focus on crafting policies that ensure economic stability and growth.

 

 

 

4o