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Monetary policy aims to make economy more dynamic: NRB

B360
B360 July 26, 2024, 3:27 pm
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KATHMANDU: Nepal Rastra Bank (NRB) today unveiled the monetary policy for the current fiscal year 2024/25, to make the country's economy more dynamic.

The monetary policy announced by NRB Governor Maha Prasad Adhikari reflects the continued commitment to a prudent and flexible approach, aimed at invigorating the dynamic economy.

Based on the situational analysis, considering stable prices and the external sector context, the flexibility of monetary policy has been maintained to foster a dynamic economy,  it is said.

The policy lays emphasis on directing lending towards the productive sector and enhancing credit quality. Additionally, regulatory measures have been implemented to ensure financial stability. Governor Adhikari highlighted that aligning the monetary policy with regulatory policies facilitates credit disbursement without compromising macroeconomic stability.

As part of its monetary policy framework, the NRB has maintained a fixed exchange rate between Nepali Rupee and Indian Rupee. The management of monetary policy aims to keep inflation around 5%, thereby avoiding undue price pressure resulting from monetary expansion. Additionally, the primary goal of this policy is to ensure sufficient foreign exchange reserves — equivalent to at least seven months’ worth — to meet the import requirements for goods and services.

The weighted average differential bank rate serves as the operating target. NRB strives to align it closely with the policy rate through automatic and rule-based open market transactions.

The objective of monetary policy is to direct liquidity management and credit flow towards the productive sector, to support an economic growth rate of 6%, as estimated by the government in the budget for current fiscal year.

Additionally, projections indicate that the growth rate of the broad money (M2) supply is expected to be 12%, while loans to the private sector are anticipated to grow by up to 12.5%.

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