May 11: Finance Minister Prakash Sharan Mahat has emphasized on bailing out the country’s economy which is heading towards recession through monetary policy rather than fiscal policy. He expressed his views on Wednesday while informing the House of Representatives about the preparations for the upcoming fiscal year’s budget.

Despite the private sector drawing attention of authorities concerned towards the need for reforms in fiscal as well as monetary policies through the budget, Mahat insisted that monetary policy is the solution to get the economy moving.

Mahat said that the economic slowdown is the result of the tight monetary policy and government spending less capital expenditure.

 “Interest rates will lower down if the monetary policy is eased and will result in low production cost,” said Mahat.

While answering the questions raised by the MPs during the discussion on the principles and priorities of the Appropriation Bill on Wednesday, he said, “The economy has not collapsed. It's not going down. Instead, it's going up slowly. Economic growth has been positive. The pace of economic growth however is slow.”

This has raised suspicions that the finance minister does not want to get the economy running through the upcoming budget.

Economist Swarnim Wagle, who is also a member of the House of Representatives, said that such perception of the finance minister is not good. According to him, the finance minister's argument about fiscal policy is wrong. He claimed that there is enough room for capital mobilization through the fiscal policy.

“The finance minister insists that there is no condition to be flexible in the fiscal policy, but to move forward only with monetary instruments. This is wrong. There is enough room to explore and be creative in fiscal policy. The finance minister’s argument is flawed,” said Wagle.

Speaking in the Parliament on Wednesday, former Finance Minister Janardan Sharma said that since there is a contraction in the overall economic activities, a controlled and expansionary policy is appropriate. He said that expansionary policy should be taken in some areas and expenditure should be cut in some areas. He said that a policy should be adopted for managerial reforms in public institutions and the available resources should be used to the maximum extent.

MP Dol Prasad Aryal said that the same old issues have come up in the principles and priorities of the next year's budget. He said that the principles and priorities of the budget cannot cover the issue of improving the existing economic situation of the country with the same old policy.

MP Gyan Bahadur Shahi said that since the policy and principles of the budget are primitive in nature, they cannot solve the current problems.