COVID-19, war to continue taking toll on national economy

Kathmandu, Apr. 27

Governor of the Nepal Rastra Bank (NRB), Maha Prasad Adhikari, said that the continuous increase of oil prices in the international market and impact of Russia-Ukraine war has created pressure on inflation.

"It will continue to impact our national economy. Meanwhile, there is a risk of new wave of COVID-19," he said while the NRB's 67^th anniversary programme organised at its office in Baluwatar on Wednesday.

He said that the central bank had announced various instruments and policies to revive the businesses and economy in the wake of the COVID-19 pandemic

The governor maintained that the policy measures taken by the NRB has contributed to stabilising the foreign currency reserve in recent months.

According to Adhikari, the previous year was the year of economic revival, so the central bank had brought a flexible monetary policy for the previous fiscal years 2020/21 and 2021/22 in order to revive and strengthen the economy.

He maintained that various measures were taken to attract Foreign Direct Investment and ease the earning of foreign currency since the very beginning of the current fiscal year as the reserves began to decrease.

The central bank had also implemented 50 per cent and 100 per cent cash margin while opening Letter of Credit for imports, put the limit on margin lending to Rs. 40 million from a bank and Rs. 120 million at maximum. Recently, the quota to import gold is brought down to 10 kg a day from 20 kg.

Governor Adhikari said that the NRB had mobilised more than Rs. 6200 billion to help the banks and financial institutions to cope with the liquidity crisis. Likewise, the NRB is studying the feasibility of implementing the digital currency.

Former Governor of the NRB, Dr. Tilak Rawal, said that the NRB has done a commendable job in addressing the economic challenges at difficult times during the pandemic and current external sector pressure.

"We must not forget that the symptoms of the economy are not good, and the international donors like the World Bank, Asian Development Bank and International Monetary Fund have estimated the economic growth rate at around 4 per cent but our government has not revised it from its earlier announcement of 7 per cent," he said.

He stated that trade deficit is likely to surpass the total size of the annual budget of the country. This year as well, the deficit will cross the budget size of Rs. 1632 billion.

"I don't see hopeful signs in the economic wellbeing of the country. We don't produce anything and import the basic food and essential goods that could be produced in the country. Why don't we plan to replace such imports and enhance export of made in Nepal goods?" said Dr. Rawal.

Dr. Rawal suggested a policy to replace the LP gas and cylinders with quality and economic supply of electricity as well as subsidy on induction cooker. 

Published in The Rising Nepal daily on 28 April 2022.