The Ongoing Liquidity Crisis and the Nepalese Economy: Reasons and Measures
Nepal has been grappling with a severe liquidity crisis over the past few months, raising concerns across the nation. Various stakeholders attribute this crisis to different factors. Many blame the banking sector for its reckless lending practices, which saw a 30% growth in loans within the first four months of the current fiscal year, far outpacing the 19% growth in deposits. Conversely, bankers and some economists argue that the crisis stems from delays in government capital expenditure. Others point to the Nepal Rastra Bank’s (NRB) recent monetary policy, which restricts banks from leveraging their capital, reserves, debentures, and new provisions for further market investments. Current Status of the Nepalese Economy In the first four months of the ongoing fiscal year, government capital expenditure reached only 6% of the budget, a sharp decline from the 10% recorded in previous years. Remittance inflows, a lifeline for the economy, have declined by 11% compared to the previous year...