July 25: The three largest umbrella associations of the private sector, the Federation of Nepalese Chamber of Commerce and Industry (FNCCI), the Confederation of Nepalese Industries (CNI) and the Nepal Chamber of Commerce (NCC) have said that the monetary policy introduced by the Nepal Rastra Bank (NRB) for the current fiscal year (FY 2023/24) will not address the current economic crisis.

Reacting to the monetary policy issued by the central bank on Sunday, the private sector stakeholders said in a joint statement on Monday that the monetary policy does not meet the expectations of addressing the challenges of the economy, including high-interest rates, low demand, cash flow problems, low production and job cuts, declining morale of the private sector and postponement of new investment plans.

"The policy taken by the central bank through monetary policy does not seem to help in lifting the economy out of recession," said the joint statement. The statement added that even if the central bank's monetary policy has been carefully and flexibly drafted to keep the economy running, the provisions in the policy prove otherwise.

Last year's monetary policy fixed the credit flow to the private sector at 12.6 per cent, but for the current year, the target has been reduced to 11.5 per cent. According to the private sector, it will be difficult to achieve the economic growth rate of 6 per cent taken by the government through the budget when the credit going to the private sector is reduced.

The private sector was expecting the central bank to take initiatives to control the increase in high-interest rates through monetary policy.

“NRB has reduced the policy rate by 0.5 per cent while keeping the bank rate unchanged. It does not seem to help in reducing the interest rate. It is necessary to use all the tools to reduce the base rate of the banks," the statement said.

The organisations argue that the economy will not be sustainable unless the monetary policy addresses the suggestions of the private sector.

One of the major demands of the private sector is the borrowers should be provide facilities for refinancing.