KATHMANDU: Nepal Rastra Bank (NRB) today organised the fourth edition of ‘National Conference on Economics and Finance’ in Kathmandu.
Finance Minister Janardan Sharma inaugurated the conference. Addressing the event, he said that foreign exchange reserves were under pressure due to high imports of petroleum products, vehicles and luxury items and pointed out the need to promote domestic production to control imports. He stressed the need to use the available resources for productivity growth and job creation.
Minister Sharma suggested Nepal Rastra Bank conduct in-depth studies and research for the sustainability of the economy. He said, “NRB is not only the regulatory body of the financial sector but also the centre for economic research,” and added that he expected to receive regular suggestions from the central bank.”
Further, Sharma urged not to compare Nepal’s economy with Sri Lanka but to focus on improving the national economy. He pointed out the need for stakeholders to make efforts to prevent Nepal’s current foreign exchange reserves from declining. He said it was not good to rely on remittances only for stability, and suggested promoting tourism, foreign investment and domestic production.
Speaking on the occasion, NRB Governor Maha Prasad Adhikari said the current account and balance of payments situation continued to be in deficit due to expansion of credit, rising imports and declining income of tourism sector. He opined that this has made external sector management challenging. He informed that the trade deficit has increased by around Rs 298 billion in the first eight months of the current fiscal year. Although remittance inflow declined from July/August last year, the remittance inflow has improved since February/March, said Governor Adhikari. At present, Nepal has foreign exchange reserves to support imports of goods for 7.4 months which could suffice for 6.7 months when service is also included, he said.
Addressing the conference, Governor Adhikari informed about the policy arrangements adopted by the government and NRB for the management of challenges in the external sector. He discussed various measures like increase in bank rates, reduction of gold imports, encouragement of foreign exchange deposits and mobilisation of foreign aid.
He opined that the situation in the external sector has improved due to the policy measures adopted for external sector management. However, he acknowledged that there was a risk of external stability unless the imports of consumer goods, which accounted for 35% of total imports, were replaced till the Russia-Ukraine war ended.
Adhikari said, “In a small and open economy like Nepal where the source of foreign exchange earnings is limited and narrow, there is an obligation to maintain adequate foreign exchange reserves. Therefore, it is important for everyone to think about the impact that the external sector’s problem may have on the overall economy and its various indicators.” He pointed out the need to increase domestic production, export promotion, remittance inflow, foreign investment and foreign aid to strengthen external sector management.
On the occasion, Deputy Governor Neelam Dhungana Timsina said the economy has been facing challenges due to high liquidity pressure, high trade deficit and remittance inflows. In the inaugural session of the conference, Senior Research Fellow of the Policy Research Institute, Dr Kalpana Khanal presented a working paper on ‘Covid 19, Nepal’s Economy and Policy System’. During the meeting, she discussed the impact of pandemic on Nepal’s economy, the policy measures adopted to address it, current indicators of economy and course of action.
At the conference, 17 working papers on economic, monetary, banking, finance, trade, capital market among other issues were presented by experts from different fields.
Earlier, international conferences were held in 2012, 2015 and 2020. This year the conference was organised at the national level due to ongoing impact of Covid 19 infection.
Around 100 people including NRB’s Deputy Governor Bam Bahadur Mishra, Director Sri Ram Poudyal, executive directors, and representatives of various organisations and researchers were present.