Nepal’s anticipated Monetary Policy for the fiscal year 2024/025 is facing prolonged delays, exacerbated by ongoing political instability following a recent change in government leadership.
This situation underscores significant economic instability in the country, prolonging the wait for essential economic guidance necessary for effective policymaking.
Despite these challenges, the delayed implementation of monetary policy in Nepal has surprisingly yielded positive outcomes, particularly in the realm of marginal lending for shares.
This unforeseen development has coincided with a notable upward trajectory in the Nepal Stock Exchange (NEPSE) index, showcasing resilience and surpassing the significant threshold of 2500 points in recent trading sessions.
Traditionally viewed as a potential obstacle or source of uncertainty, the delay in monetary policy appears to have fostered an environment conducive to increased activity in marginal lending for shares.
Nepal must prioritize stability and transparency in economic governance to mitigate current uncertainties and steer the country toward sustainable economic development.
Market participants, encouraged by the delayed policy impact, have seized new opportunities and gained confidence in leveraging their investments in the equity market.
However, the prolonged release of the Monetary Policy has also unleashed a wave of economic uncertainties across various sectors, notably affecting businesses.
The absence of clear interest rate directives has left financial institutions, businesses, and borrowers uncertain about future borrowing costs and investment decisions.
This uncertainty poses obstacles to business operations, potentially stalling economic activities and dampening growth prospects.
Moreover, the targeted inflation rate of 5.5% for 2024/025 has been adversely affected by the delay in monetary policy.
The traditional measures included in the policy to curb inflation through targeted monetary tools have not been implemented timely, risking heightened inflationary pressures and potentially reducing citizens’ purchasing power.
Coordination between Fiscal Policy and Monetary Policy is crucial for achieving targeted economic growth of 6%, primarily driven by the private sector, especially businesses.
The Ministry of Finance emphasizes increasing capital expenditure, with the Central Bank facilitating to encourage production within the country.
Timely monetary policy interventions are vital for price stability and financial stability, particularly through managing interest rates.
Furthermore, the delay disrupts liquidity management strategies in the banking sector. Banks rely on timely directives from the Monetary Policy to adjust liquidity, essential for maintaining financial stability.
The absence of such guidance could disrupt cash flow management within banks, affecting their ability to meet financial obligations and potentially destabilizing the financial system.
Looking ahead, expectations from the Monetary Policy 2024/025 include prioritizing sectors like real estate and assembling industries.
Swift resolution of these issues is essential to restore confidence, stimulate investments, and foster a resilient economic environment for the nation’s future prosperity.
There is a pressing need to facilitate real estate activities to address rising property prices and encourage economic activity.
Additionally, soft loans should be promoted to boost investor confidence and support new businesses, thereby enhancing employment opportunities.
Flexible storage of revenues from assembling industries is also crucial for economic stability and growth.
Addressing these challenges demands urgent institutional reforms and streamlined policymaking processes.
Nepal must prioritize stability and transparency in economic governance to mitigate current uncertainties and steer the country toward sustainable economic development.
In conclusion, while Nepal awaits the Monetary Policy 2024/025, navigating through political instability and leadership changes remains critical to resolving economic uncertainties.
Swift resolution of these issues is essential to restore confidence, stimulate investments, and foster a resilient economic environment for the nation’s future prosperity.
Comment