Govt mulling policy measures to address liquidity crunch

The government is planning to adopt policy-based precautionary measures to address the liquidity crisis not affecting other various sectors. The high-level committee formed by the Cabinet to study the deepening liquidity crisis decided to adopt such measures at the committee's first meeting on Monday.

The meeting chaired by Yubaraj Khatiwada, Vice Chairman of National Planning Commission, has begun discussions to adopt policy-based precautionary measures by studying rising inflation, liquidity crisis in the financial system and external sectors. The country is facing liquidity crisis with a Balance of Payment (BoP) deficit of more than Rs. 20 billion with a decline in the growth rate of remittance inflow in the first four months of current fiscal year. In the first four months, import has increased, especially with significant growth of gold import in the country. At the same time, Nepal Rastra Bank has imposed ceiling on realty exposure for financial institutions.

"We should not create a situation where decision to solve one problem gives rise to another problem," said a member of the committee. "We should not take any hasty decision as well." The government had constituted the committee to make necessary recommendations to address the liquidity crunch. The committee comprises has finance secretary, deputy governor and experts as its members.

According to a member of the committee, decision should be taken after evaluating the internal and external sectors. "We need to have a detailed analysis of the situation," he added. The committee will be making decisions without leaving a long-term negative impact. The committee is of the view that the central bank and the Ministry of Finance should have a unanimous voice regarding the economic situation.

The committee is planning to make concrete advises to the government in the next meeting scheduled to be held in 15 days. "We can also call for meeting before 15 days to arrive at decision if need be," said the member.
Source:eKantipur