CNI reaction on monetary policy: control of the money supply in the market could increase interest rates – myRepublica

KATHMANDU, July 29: The Confederation of Nepalese Industries (CNI) has declared that the provisions taken by the monetary policy are likely to exert pressure on the external sector and to reduce the situation of exchange.

In its first official monetary policy reaction recently unveiled by the Nepal Rastra Bank, the CNI also said that interest rates could rise a lot as monetary policy seeks to control the supply of money in the market.

The CNI said that by increasing the mandatory cash balance, statutory liquidity, bank rate, policy rate, deposit collection rate, the loan interest rate will definitely increase. According to the Confederation, these agreements will create more pressure on the existing liquidity in the market.

Likewise, it is seen that the monetary policy has taken a strict form by controlling the loans flowing in various sectors, which will further reduce the aggregate market demand and also affect job creation.

As the cost of credit is high, it will be difficult to achieve the 8% economic growth that the government has taken thanks to the financial policy, so the confederation has asked to review the key rate during the next revision of the first quarter of monetary policy in order to coordinate aggregate demand so as not to disturb the balance of the external sector.

Likewise, it is understood by the confederation that monetary policy has been introduced in a flexible manner for the productive sector and strict for the other sectors. The confederation demanded that the interest rate be determined by adding a maximum premium of 2% to the base rate while granting loans to the private sector for the construction of information technology and industrial parks, including exports , food production, animal husbandry and fishing.

The confederation demanded that refinancing facilities be provided to the tourism sector as well as productive sectors, small businesses, exports and areas that have not yet recovered from the Covid pandemic, and to link refinancing to productivity and employment growth.

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