Nepal Rastra Bank (NRB) is working to unveil the monetary policy for the FY 2020/21 at a time when COVID-19 and the lockdown are ravaging the economy. NRB is not only under pressure to provide support to the government, businesses and banking industry to cushion the economic and financial blow, it is also entrusted to safeguard the financial stability, keep inflation in check and to ensure liquidity in the market.
This will be the first monetary policy of the NRB after Maha Prasad Adhikari took over the leadership of the central bank as governor in April 2020.
In an interview with Republica’s Sagar Ghimire on Monday, Governor Adhikari discussed the focus of the upcoming monetary policy, plans to provide relief and other facilities to businesses battered by the pandemic, efforts to lower interest rates and measures to safeguard financial stability during the crisis, among others.
What is the initial assessment about the economic and financial impact of COVID-19 and containment measures imposed by the government?
The pandemic has impacted the global economy, and we are also following other’s assessments and outlook. The latest OECD’s report projects a 6 percent contraction in the global economy in 2020. Our Central Bureau of Statistics has already come up with a report that estimates the country’s economy to grow by 2.28 percent in the current fiscal year 2019/20, compared to our original target of 7 percent plus economic growth rate. The three-month lockdown has also made a huge impact on the economy. Entrepreneurs have not been able to run their businesses. When the businesses are shut, it’s obvious that it will squeeze the economy. Despite all those reports, Nepal’s position in South Asia is better. We have a positive outlook compared to negative growth in other countries. But the pandemic has put a pressure on people, society, borrowers, the banking system and the country as a whole.
There has not yet been a rigorous study about the impact of the pandemic on our economy. Does not this raise a question about the capacity of the central bank to carry out such work? Are your policy responses ad-hoc?
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