NRB to further tighten money supply as pressure continues to exist on inflation and foreign currency reserves

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

Through the third quarterly review of monetary policy unveiled on Friday, NRB has said that the flexible policy adopted during the impacts of the COVID-19 has taken the economy towards recovery along with significantly increasing domestic demand. Due to these reasons together with disruption in the supply chain caused by the Russia-Ukraine war, the pressure on consumer price index and external sector’s indicators are still critical till the date, according to NRB.

NRB has also underlined the increasing financial resource gap behind the increased pressure on liquidity position with the banks. The central bank has projected that the gap between gross domestic savings and investment will reach 5.3 percent by the end of the current fiscal year. Last year, the resource gap stood at 2.48 percent.

The central bank, however, has kept the existing cash reserve ratio unchanged at three percent and bank rate at seven percent. Similarly, the statutory liquidity ratio has been kept unchanged at 10 percent, 8 percent and 7 percent for commercial banks, development banks and finance companies, respectively.