'Credit growth only supporting import trade'

 Kathmandu, Apr. 9

Economist Dr. Bishwas Gauchan projected that external balance is going to pose significant challenges to the macroeconomic stability of the country in the future.

"Trade which has 15.7 per cent contribution to the economy has received 20 per cent credit from the banks and financial institutions while only 13.2 per cent credit is mobilised in agriculture that has 25.8 per cent contribution to the GDP. This is not a good sign," he said while speaking at the National Management Conference 2022, organised by Management Association of Nepal on Saturday.

Average rate of annual economic growth in the last three decades was 4.5 per cent but private sector credit growth stood at 20.3 per cent per annum on average.

According to 2020/21 trade statistics, 23.5 per cent of the total imports were related to agricultural products, most of which can be produced locally. Only 12.1 per cent of the total import is used for building fixed capital formation while 34.5 per cent is used for final consumption and 53.4 per cent is used as intermediate consumption where the value addition is little, said Dr. Gauchan.

He criticised the Nepal Rastra Bank's move to increase the paid-up capital of the banks by three-fold in 2015 and said that the current crisis could partly be attributed to that policy decision.

Stating that the NRB's policy rate has failed to provide policy guidance and achieve its macroeconomic policy goals, he maintained that it is necessary to take various measures to make the policy rate effective in conjunction with other policy tools such as macro-prudential policy, credit policy and regulatory policy.

Presenting a research paper at the conference, Professor Dr. Mahananda Chalise said that Nepali business organisations were faring better in terms of knowledge management behaviours.

According to him, an organisation with a capability in knowledge management is less likely to develop new to the world of innovations. When an organisation develops a new product or service for which it lacks the scientific or business expertise, a capability in knowledge management may not be helpful.

However, by contrast, Nepali organisations developing incremental innovations tend to have well developed knowledge management behaviours and practices, said Dr. Chalise. 

Published in The Rising Nepal daily on 10 April 2022.