Nepal Rastra Bank Reviews Monetary Policy for FY 2082/83

Kathmandu . Nepal Rastra Bank has published the annual review report of the monetary policy for the fiscal year 2082/83, making public the status of implementation of targets and programs.

According to the review, the target of keeping inflation around 5.0 percent in the fiscal year 2082/83 has seen an average consumer inflation of 2.66 percent in the first ten months. On a point-to-point basis, inflation stood at 5.04 percent in Baishakh 2083.

On the external front, the monetary target of maintaining sufficient foreign exchange reserves to cover at least seven months of merchandise and service imports has been significantly strong. Based on the imports of the first ten months of the current fiscal year, the foreign exchange reserves held by the banking sector are sufficient to cover 22.6 months of merchandise imports and 19.2 months of merchandise and service imports.

Similarly, the projection for the fiscal year 2082/83 was for a growth rate of broad money supply of 13.0 percent and credit growth to the private sector of up to 12.0 percent. However, on a point-to-point basis as of the end of Baishakh 2083, broad money supply increased by 15.2 percent, while credit to the private sector from banks and financial institutions increased by only 6.7 percent.

The weighted average interbank rate of banks and financial institutions has been maintained as the operational target of the monetary policy, with the continuation of automated and rule-based open market operations. Regular and structural instruments have been used to keep the interbank rate around the policy rate, and to mitigate the impact of structural liquidity on interest rates, various series of 'Nepal Rastra Bank Debenture 2083' have been issued.

The bank rate, which serves as the upper limit of the interest rate corridor, was reduced from 6.5 percent to 6.0 percent, and the deposit collection rate, which serves as the lower limit, was reduced from 3.0 percent to 2.75 percent, with a directive issued on Ashadh 32, 2082. Similarly, the policy rate has been reduced from 5.0 percent to 4.5 percent, as stated in the report.

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