Governor Maha Prasad Adhikari Provides Clarification on how Market Liquidity is Slowly Improving

The prospect of an economic rebound in Nepal has been dashed by a lack of liquidity in the banks and financial institutions (BFIs). Due to a significant trade deficit and the non-convertibility of the Nepalese Rupee (NPR), liquidity problems are frequent in Nepal.

However, according to Maha Prasad Adhikari, Governor of Nepal Rastra Bank (NRB), internal market liquidity is improving.

Speaking to the Nepal Bankers Association's (NBA) 36th Annual General Meeting on Monday in Kathmandu, Governor Adhikari noted that indicators for the first quarter of the current fiscal year also indicated better liquidity. He explained that because the interbank rate is now 7.07 percent, down from 8.5 percent at the start of the fiscal year, "this also implies that liquidity is increasing." Additionally, the balance of payment remained at a surplus of Rs 6 billion this year as compared to a deficit of Rs 88 billion last year.

The governor has also emphasized that shifting to domestic production is essential. "The emphasis must be on indigenous production in order to replace imports," he stated. According to the Nepal Rastra Bank's estimation of the country's current macroeconomic and financial position based on data from the previous three months that ended in mid-October 2022/23, the inflation rate stayed at 8.50 percent on a year-over-year basis. The overall imports and exports during the period were down by 16.2% and 35.7%, respectively, while the gross foreign exchange reserves were USD 9.48 billion.

Likewise, Governor also asserted that the country's foreign exchange reserves were steadily growing and that other economic issues were beginning to be resolved.