The Federation has stated that the monetary policy has embraced the reality that the private sector's role will be decisive in achieving the government's targeted 7 percent economic growth.
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The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has described the monetary policy for fiscal year 2083/84, made public by Nepal Rastra Bank on Tuesday, as positive and balanced, stating that it will boost the morale of the private sector.
The Federation believes that, as the country’s economy is gradually moving towards recovery, the monetary policy has sought to maintain a balance between price stability, financial sector stability, and high economic growth. The Federation also stated that the monetary policy has embraced the reality that the private sector’s role will be decisive in achieving the government’s target of 7 percent economic growth.
FNCCI President Anjan Shrestha said that the flexible approach adopted by the monetary policy to expand private sector investment, increase production, create employment, and further energize economic activities is appropriate. “The monetary policy has attempted to address various issues that the Federation has been raising for a long time,” President Shrestha said. “Arrangements to remove the provision that created unlimited liability on the basis of personal guarantees, management of non-performing loans in sick industries, and measures to revive stressed loans are positive steps.”
President Shrestha also said that the provision to set limits on share mortgage loans based on institutional capacity, and to further facilitate the loan-to-collateral ratio for large electric vehicles used in public transport, are positive developments.
The Federation has emphasized that the upcoming directives should clearly include the restructuring and rescheduling of loans for small, medium, and large industries and businesses, as well as for various sectoral loans.
The Federation believes that the decision to keep the policy rate, standing deposit facility rate, bank rate, cash reserve ratio, statutory liquidity ratio, and standing liquidity facility unchanged will maintain policy stability. The Federation’s statement issued on Wednesday mentioned that this is expected to increase investor confidence and make the business environment more predictable.
Similarly, the Federation has welcomed the policy to further digitalize banks and financial institutions, reduce financial costs, improve service quality, and make regulatory arrangements simpler, clearer, and more effective. The Federation expects that the decision to simplify directives for banks and financial institutions and to facilitate foreign exchange arrangements will help make trade, investment, and foreign transactions easier.
The Federation believes that Nepal Rastra Bank’s projection of sufficient foreign exchange reserves, increased remittance inflows, tourism income, and service exports strengthening the external sector will help energize the domestic economy. “However, the success of the monetary policy depends on its effective implementation,” President Shrestha said. He stated that, in order to achieve the target of 11 percent credit growth and utilize the ample liquidity available in the banking system, credit should be provided smoothly and at concessional rates to industry, agriculture, tourism, energy, information technology, infrastructure, export-oriented industries, and small and medium enterprises. President Shrestha believes that economic recovery cannot gain momentum unless credit is expanded to the real productive sectors.
The Federation has also stressed the need to advance the government’s economic reform program, investment-friendly legal reforms, effective implementation of capital expenditure, and the pace of projects in parallel with the monetary policy.
The Federation has expressed its commitment to continue working in partnership and providing constructive support to Nepal Rastra Bank and the government to enhance the private sector’s competitiveness, expand investment, and achieve sustainable economic development. Meanwhile, the Federation believes that the demand of the private sector to make loan classification and loan loss provisions more flexible should be seriously considered, and that the arrangements related to watch lists and blacklisting should be made more flexible and easier for two years under the current circumstances.
