Nepal Rastra Bank has introduced a flexible expansionary monetary policy to increase credit flow to the private sector by reducing interest rates. A similar policy taken post-Covid failed to create demand. Ease of liquidity neither directed investment into the productive sector, nor diverted funds from borrowers back into the banking system.

Apart from the confidence in the external sector, the bandages that were tried to put on the injured economy have not worked. Expansionary monetary policy has been announced at this time. Deposit collection rate has been reduced from 3.0 to 2.75 percent to increase demand for investment loans. The policy rate has been reduced from 5.0 to 4.5 percent.

Similarly, to build/buy a house Rs. A loan of 2 crores has been increased to 3 crores. Apart from this, policies such as setting limits on loan-to-value ratio and fixed loans have been introduced to control risk. However, when the crisis of confidence is happening nationwide, weak enforcement of regulatory provisions and failure to monitor the flow of loans to priority areas, even good borrowers are afraid of diverting resources to unproductive areas that would benefit them.

There are also instances where some banks are willing to give loans in the 'collateral' and fast-paying sectors against the instructions of the National Bank. A policy with flexibility cannot be called bad. But is it a reason and belief, which can increase the demand for goods and services as expected? The private sector is naturally happy with a loose policy with flexibility, but such a policy has been brought for the benefit of the government, the private sector and the people.

Regardless of whether the government or the private sector takes charge of the economy, who will take responsibility for the stability of the macroeconomy and the impact it has on the lives of citizens? The government is proud and does not mind being praised by the private sector. But who will take care of the helpless 59 lakh 20 thousand people out of 292 lakh population, who are below the absolute poverty line?

It cannot be said that the problem of liquidity will not come again tomorrow due to the rain of loans in the unproductive sector. At that time, import will increase, payment collection will be negative and foreign capital accumulation may decrease. Even if there is more flow to the non-paying group, there is a fear that non-performing loans will increase and face financial stability problems.

If demand continues to decline, monetary easing alone cannot keep the economy moving and vibrant. If monetary policy along with fiscal policy along with good governance and structural reforms can be created, sustainable demand can be created. Many things in the country are unorganized and uncontrolled and the current economic structure is on the verge of collapse due to legal complications and bottlenecks. Is the monetary policy made with the participation and support of the financial policy? Is it possible to restore public trust with the ambitious policy taken now?

It will be easy to explain the reason for the caution that we have taken if we can do a little bit of the current main problem. About 7 trillion 50 billion is accumulated in the banking system but there is no demand for loans. In 11 months of this financial year, 15 trillion 32 billion 93 million remittances have been received.

Foreign exchange reserves have reached 25 trillion 69 billion 38 billion. But everyone is confused, what did the poor get from the expected data from the external sector? Why is there a problem in the macro economy even when the external sector is moving in a positive direction? What should be our policy options?

Imports have declined and the government's ability to make capital expenditures has weakened, making job creation and economic growth difficult. Due to the uncertain and complex legal structure, the demand in the banking sector has not increased. There is a lack of infrastructure in the tourism sector, which has strong potential for employment, and there is a weakness in disaster management. Investors' confidence cannot be won until financial management and policy reforms are implemented through structural reforms in these sectors.

As the remittances are used up in consumption and the rest of the savings cannot be used in the productive sector, the government's initiatives are limited to formalities and stability has not come to the economy. Stability of the external sector is essential but internal movement of the economy is not satisfactory due to countless reasons we are living with a sick economy.

On the one hand, the burden of debt that cannot be borne by our capacity, on the other hand, the economic inequality that is increasing due to the lack of employment is a matter of concern. In every sector of the economy, there is a tangle of complex rules and priorities. The people are reluctant to accept the state as their guardian because the services that should be delivered by the ineffective administrative mechanism that has been adopted by political maneuvers are lathal. Due to insufficient utilization of sufficient resources, the debt is increasing despite the savings. This situation was prolonged. This is the reason that although poverty has decreased, economic inequality has increased. To break the story, the burden of debt is being borne by all developed and underdeveloped countries. But with the art of managing it, a country is ahead of its development even with a loan. Some countries have reached the position of increasing the burden of debt to pay the debt. How is it possible to be able to pay off debt even by taking a loan and make economic development possible? This example can also be helpful in our policy making.

Looking at the data of developing and developed countries, the top five countries with high public debt compared to GDP are Sudan (252 percent), Japan (234.9 percent), Singapore (174.9 percent), Greece (142.2 percent) and Bahrain (141.4 percent). But the nature of the problem is different.

Many developed and developing countries have a high debt-to-GDP problem. They don't have to stop their growth when they have the skills to manage the debt. Their experience can be a lesson for us.

In Japan, the long-term economic slowdown and the increasing number of elderly citizens have made it difficult to cover the cost of social services. Hence the increase in debt. However, quantitative easing and low interest rate policies have been adopted to reduce the burden of borrowing.

It is hoped that such a policy will increase the demand for government bonds and reduce the debt repayment burden. Although this situation looks like the policy adopted by Nepal, the situation in both countries is different. In Japan, loan demand groups and individuals and organizations who can invest in the productive sector have been able to bear the burden of loans because of the quality and capacity and the strict implementation of regulation.

Singapore's public debt appears to be high relative to GDP, but the value of assets is greater than the amount of debt incurred when converting the financial assets they hold into monetary value. So the debt doesn't seem to risk causing much of a shock to its economy.

Greece's rising debt has undermined the competitiveness of the economy, misreporting debt and financial data, making it hard to see what the truth is. Similarly, in Bahrain, over-reliance on oil income and over-investment in development projects has led to an increase in debt. Since the time of Kovid, we can hope for the stability of the economy as we have adopted a policy of extending the loan and interest repayment period and not affecting the capacity of the borrower so that the household does not have financial pressure.

America has a debt to GDP ratio of 123 percent. The budget deficit reached 6.3 percent of GDP due to excessive state spending on social security, state-sponsored special health insurance programs like Medicare, and health care. It seems that billions of dollars will be lost due to the interest rate that will be reduced after the implementation of the new spending law.

President Donald Trump is pushing for the resignation of Jerome Powell, the head of the central bank appointed during his first term as president, for not lowering interest rates, which looks set to further complicate the deficit budget situation. However, the US seems to be trying to balance the economic complexity to a large extent by adjusting the monetary policy by the Federal Reserve to reduce the financial deficit, managing the interest rate and controlling inflation without compromising on economic growth. 

China's debt-GDP is 66-70 percent. Even if the debt is not so high, the problem may be exacerbated by the continued policy of economic stimulus. Due to the investment in physical infrastructure and the state's policy of maintaining minimum economic growth even in slow economic expansion, although the debt is less compared to other countries, it may be hit by economic recession and demographic challenges.

It is found that China is also implementing government spending that has been approved to reduce the potential tax and investing in high-priority construction and physical infrastructure structures by issuing government 'bonds'.

Such a policy seems to regulate the economy that can suffer. China's economic growth target of 5.2 percent, a little higher than 5 percent, seems to solve the problem. Now, due to the 'tariff war', inflation has increased in America. According to the International Monetary Fund, the risk of recession also remains. 

China appears to have suffered little damage from the US-initiated trade complexities. In India too, debt-GDP is estimated to be 80-82 percent. In addition to social programs, economic incentives and investment in physical infrastructure, tax-GDP is low, so it has to rely on loans. India has adopted a medium-term debt management strategy to reduce its debt burden, which attempts to address interest rate and foreign exchange risks. 

Nepal should also adopt a policy of gradually reducing the amount of external debt and repaying it when it has the capacity to get rid of expensive debt. Even when there is abundant foreign capital savings, the policy decisions have not been able to adjust the type and amount of savings and loans. In addition to this, we have not been able to satisfactorily assess the cost of debt increased by the devaluation of the Nepalese currency. After 'graduation' one may have to face other problems due to the possibility that the loan interest will increase further. The

for us has been limited to the slogan of strict austerity and cutting unnecessary expenses (foreign visits, spending on non-priority areas). There is no match between words and actions. It is important to invest in projects that do not add to the future financial burden and give high returns. Because we have failed in tax management, we have not been able to increase the scope, nor the revenue collection. Because the expenditure is high compared to the income.

Sometimes I want to put the implementation of the Public Debt Management Act into doubt. It does not seem that the provision to take external loans within the scope of one-third of the total household income of the last financial year has been implemented. This has had a negative impact on the ability to borrow and pay off random loans.

In the 11 months of the financial year 2081/82, the expenditure of the government has reached 12 trillion 82 billion, while the revenue is limited to 10 trillion 16 billion. Some other available studies including Nepal Rastra Bank have shown that Nepal's practical capacity for public debt i.e. debt-GDP is around 33 percent and 35.5 percent but our debt has now touched nearly 47 percent of GDP.

Most countries have adopted policies that can be implemented in their own way after evaluating their needs, resources and capabilities. Japan maintains low interest rates and also borrows directly from the central bank to fund government spending without raising taxes or borrowing from the private sector.

Debt monetization policies such as buying government 'bonds' have been adopted. In addition to being a developed country as a strong financial center, Singapore also has a high return on investment, so the burden of debt is reduced. Greece seems to be managing debt by adopting austerity and Bahrain by expanding the scope of the economy and increasing foreign investment.

Within Nepal's limited revenue collection, only 10 percent of that revenue has to be spent on debt repayment, and the remaining limited resources have resulted in health, education, physical infrastructure, social security and even areas that can give good returns to development. We are getting trapped in debt trap. We have not been able to speed up the slow development as we thought and wanted.