Monetary Policy fails to bring financial stability
KATHMANDU, July 8:
The experts have blamed the central bank’s failure in bringing financial stability, contain price hike, supply money and meet Balance of Payment (BoP) target.
“The central bank’s inefficiency on monitoring its Monetary Policy targets resulted in the failure to meet its targets,” former economic advisor of the Finance Ministry Tula Raj Basyal, here in the valley today.
“Central bank must supervise and monitor its Monetary Policy to achieve the target,” he said, adding that central bank can take immediate corrective action — had it monitored regularly — that will help achieve Monetary Policy’s target.
He also questioned the authenticity of the data. “The central bank has brought the tight Monetary Policy to contain the price hike but it could not crack whip on price hike and also BoP recorded deficit,” he suspected, adding that central bank has miscalculated the money supply.
Agreed the former governor of the central bank Deependra Bahadur Chhetri. “The central bank’s target of money supply and private sector lending by the commercial banks failed pulling the growth rate down,” he said, blaming the wider usage of Indian Currency for the failure in central bank’s calculation of money supply.
The current liquidity situation has to be addressed by the central bank immediately to avert the systemic risk, Basyal said, adding that it would lead to the economic crisis like in other countries. Capital flight has also squeezed the liquidity from the market, he added.
However, Chhetri suggested exempting the cost of remitters to channelise the remittance to the banking sector that could help correct current deficit Balance of Payment situation. “The central bank has to be cautious while bringing Monetary Policy as expansionary budget — that looks from current government’s mood — will ignite price hike,” he suggested, adding that last Friday of current fiscal year should be observed as ‘Black Friday’ as the day might present a rather gloomy scenario of the financial institutions.
Traditionally the last Friday of the fiscal year is the closing in the financial institutions.
Target Vrs Reality
• Inflation seven per cent 9.5 per cent (by mid-May)
• Money Supply 15 per cent 3.7 per cent (by mid-May)
• Commercial banks’ Pvt Sector lending up by 16.4pc up by 11.6pc (by mid-May)
• Balance of Payment Rs 9bn surplus Rs 11.67bn deficit (by mid-May)
• Commercial banks deposit mobilisation Rs 709 billion Rs 661 billion (by July first week)
• Growth 5.5 per cent 3.47 per cent (CBS)
Source: THT
The experts have blamed the central bank’s failure in bringing financial stability, contain price hike, supply money and meet Balance of Payment (BoP) target.
“The central bank’s inefficiency on monitoring its Monetary Policy targets resulted in the failure to meet its targets,” former economic advisor of the Finance Ministry Tula Raj Basyal, here in the valley today.
“Central bank must supervise and monitor its Monetary Policy to achieve the target,” he said, adding that central bank can take immediate corrective action — had it monitored regularly — that will help achieve Monetary Policy’s target.
He also questioned the authenticity of the data. “The central bank has brought the tight Monetary Policy to contain the price hike but it could not crack whip on price hike and also BoP recorded deficit,” he suspected, adding that central bank has miscalculated the money supply.
Agreed the former governor of the central bank Deependra Bahadur Chhetri. “The central bank’s target of money supply and private sector lending by the commercial banks failed pulling the growth rate down,” he said, blaming the wider usage of Indian Currency for the failure in central bank’s calculation of money supply.
The current liquidity situation has to be addressed by the central bank immediately to avert the systemic risk, Basyal said, adding that it would lead to the economic crisis like in other countries. Capital flight has also squeezed the liquidity from the market, he added.
However, Chhetri suggested exempting the cost of remitters to channelise the remittance to the banking sector that could help correct current deficit Balance of Payment situation. “The central bank has to be cautious while bringing Monetary Policy as expansionary budget — that looks from current government’s mood — will ignite price hike,” he suggested, adding that last Friday of current fiscal year should be observed as ‘Black Friday’ as the day might present a rather gloomy scenario of the financial institutions.
Traditionally the last Friday of the fiscal year is the closing in the financial institutions.
Target Vrs Reality
• Inflation seven per cent 9.5 per cent (by mid-May)
• Money Supply 15 per cent 3.7 per cent (by mid-May)
• Commercial banks’ Pvt Sector lending up by 16.4pc up by 11.6pc (by mid-May)
• Balance of Payment Rs 9bn surplus Rs 11.67bn deficit (by mid-May)
• Commercial banks deposit mobilisation Rs 709 billion Rs 661 billion (by July first week)
• Growth 5.5 per cent 3.47 per cent (CBS)
Source: THT
