NRB to further tighten money supply as pressure continues on inflation and foreign exchange reserves – myRepublica

The NRB unveils the third quarterly review of monetary policy

KATHMANDU, May 28: The Nepal Rastra Bank (NRB) has said it will tighten the money supply further if soaring consumer inflation and existing pressure on foreign exchange reserves are not eased.

As part of the third quarterly monetary policy review unveiled on Friday, the NRB said the flexible policy adopted during the impacts of COVID-19 has led the economy towards recovery while significantly boosting domestic demand. For these reasons as well as the disruption of the supply chain caused by the Russian-Ukrainian war, the pressure on the consumer price index and external sector indicators are still critical to this day, according to NRB.

NRB also underlined the growing shortage of financial resources behind the increased pressure on the liquidity position with banks. The central bank has forecast that the gap between gross domestic savings and investment will reach 5.3% by the end of the current fiscal year. Last year, the resource shortfall was 2.48%.

The central bank, however, kept the existing cash reserve ratio unchanged at 3% and the discount rate at 7%. Similarly, the statutory liquidity ratio remained unchanged at 10%, 8% and 7% for commercial banks, development banks and finance companies, respectively.

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