The Nepal Weekly 
May 5, 2024
Governor Maha Prasad Adhikari underscored that maintaining overall economic stability, including in the financial sector, remains the central bank’s top priority on the occasion of Nepal Rastra Bank’s 68th anniversary. Despite a mixed economic situation in the fiscal year 2023/24 with a slowdown in credit flow and economic activities due to weakened demand, Governor Adhikari highlighted NRB’s success in maintaining comfortable foreign exchange reserves, keeping inflation under control, strengthening the payment system, and ensuring financial stability.
“Like the previous fiscal year, remittance inflows remained high, and the significant increase in remittances coupled with a decline in imports helped maintain a current account and overall balance of payments surplus,” stated Governor Adhikari. He added that this facilitated liquidity management and eased pressure on interest rates.
The available liquidity and declining lending rates have created a foundation for accelerating economic activities. While wholesale price and wage rate indices showed moderate growth, and inflation declined in Nepal as well as in India, the pressure on Nepal’s price situation has been gradually easing. However, Adhikari cautioned about potential volatility in fuel and food prices due to the ongoing conflicts in Russia-Ukraine, the Middle East, and export restrictions imposed by some countries on food grains.
Highlighting the favorable prospects, Governor Adhikari expressed confidence that the agricultural production growth rate would be satisfactory in the fiscal year 2080/81 due to timely plantation, favorable weather conditions, and easy availability of fertilizers. With the addition of around 600 MW of hydropower generation and improvements in the tourism sector, he expected the economic growth rate to remain at an average level for the current year. Acknowledging challenges, the Governor noted that government capital expenditure has not been as expected, and a significant number of youths have gone abroad for foreign employment and study in recent years, keeping domestic demand subdued.
While the slowdown in economic activities has led to a slight increase in the non-performing loan ratio, with the average ratio of banks and financial institutions standing at 3.73 percent as of mid-March 2024, Adhikari expressed optimism about the current fiscal year’s economic growth improving compared to the previous year, driven by rising tourist arrivals and exports of electricity and cement.
Amidst the current account and overall balance of payments surplus, the liquidity situation has improved significantly, with deposit and lending interest rates declining. He stated that the policy stance has been gradually eased due to the balance of payments surplus and easing of price pressures, which is expected to lead to a gradual improvement in economic activities.
On this historic occasion, Governor Adhikari extended heartfelt congratulations to all employees being honored with the Outstanding Service Award. He paid tribute to the former governors and seniors of the bank for their contributions and expressed gratitude to the Government of Nepal, the Ministry of Finance, banks, financial institutions, international organizations, media, and well-wishers for their support. (Based on speech delivered by Governor Maha Prasad Adhikari during the anniversary celebrations of the NRB) on Baishakh 14.
