Nepal / NEWS · August 13, 2021 0

Monetary Policy of the Fiscal Year 2077/78 PDF Download In English

Monetary Policy of the Fiscal Year 2077/78

Crisis as well as economic crisis has been created in different environments.A century later, an unexpected epidemic has infected more than 13.9 million people and killed 593,000. The world economy has contracted to its greatest contraction since the Great Depression of the 1930s.

Poverty, unemployment and income inequality are expected to increase as the world faces a simultaneous health crisis and economic crisis. With the foundation being laid to achieve the national aspiration of ‘Prosperous Nepal, Happy Nepal’ while achieving sustainable and high economic growth with social justice, COVID-19 has added an unexpected challenge. After three consecutive years of high economic growth, low economic growth is estimated in FY 2076/77.

Inflation remained within the target range, while trade deficit and current account deficit improved due to contraction in imports. BOP surplus has increased significantly.

Credit expansion is lower than deposit mobilization. Financial access has expanded significantly.
The use of electronic payments in financial transactions is increasing.Along with financial expansion, infrastructure development work for modern payment system has moved forward.

Due to the increase in the use of mobile banking, banking business has become easier even during the shutdown.
Covid-19 is expected to affect labor markets and remittance inflows worldwide.

Along with the return of labor force to foreign employment, it has also affected the domestic labor market.
If the major labor destination countries go into economic contraction and the inflow of remittances decreases, it will have an impact on resource mobilization in the banking sector, external sector balance and poverty alleviation.

To manage the impact of the Kovid-19 epidemic on the economy, monetary policy needs to focus on economic recovery while maintaining price and external sector stability.

In order to keep the economic activities moving, the credit management of the COVID-19 affected areas and access to the Nepal Rastra Bank should be facilitated and financial resources should be encouraged towards entrepreneurship development, productivity growth and job creation.

Keeping in view the national and international economic situation and scenario, the monetary policy of the Fiscal Year 2077/78 has been formulated in accordance with the provisions of the Nepal Rastra Bank Act, 2058 BS.

In addition, the Fifteenth Five Year Plan of the Government of Nepal, the budget for the Fiscal Year 2077/78, the Financial Sector Development Strategy and the Third Strategic Plan of this Bank have been taken as the basis for formulating monetary policy.

This monetary policy has been formulated keeping in mind the suggestions received from all the stakeholders.

International economic situation

The global economy has shrunk as the chain from production to supply has been disrupted by measures taken globally to control and prevent the Covid-19 infection.

According to the World Economic Outlook, updated by the International Monetary Fund in June 2020, the world economy is projected to shrink by 4.9 percent by 2020.

The International Monetary Fund (IMF) has projected that the economies of developed countries will expand by 1.7 percent in 2019 and shrink by 8 percent in 2020. Emerging and developing economies are projected to grow by 3.7 percent in 2019 and shrink by 3 percent in 2020.

The International Monetary Fund (IMF) has projected the Asian economy to shrink by 1.6 percent by 2020. Of this, India’s economy is projected to shrink by 4.5 percent and China’s economy is projected to expand by 1 percent. The International Monetary Fund (IMF) has projected that Nepal’s economic growth will be limited to 1 percent.

Inflation has been somewhat lower due to the contraction in aggregate demand due to COVID-19 as well as falling prices of petroleum products. The International Monetary Fund (IMF) has projected inflation in developed economies at 1.4 percent in 2019 to 0.3 percent in 2020. In emerging and developing economies, monetary policy inflation for the fiscal year 2077/78 is projected to be 4.4 percent in 2020 compared to 5.1 percent in 2019.

To meet the challenges facing the world economy, most countries have adopted expansionary monetary and financial policies. Despite the uncertainty created by the COVID-19 crisis, many countries have been gradually easing sanctions and other measures to facilitate economic activity.