Kathmandu: Nepal Rastra Bank, in its recent unveiling of the Monetary Policy for the fiscal year 2023-24, has set forth an ambitious framework with seven key targets. One of the primary aims of this policy is to ensure that foreign exchange reserves remain at a level sufficient to cover anticipated imports of goods and services for a minimum of seven months.

To achieve this, the policy rates have been meticulously determined based on the capacity of foreign exchange reserves to cover imports and the desired annual inflation rate. Notably, the exchange rate of the Nepalese currency against the Indian currency has been maintained, providing stability in the financial markets.

To maintain stability in the interbank interest rates, the central bank will actively engage in open market operations, aligning them with the operating target. This approach will ensure that interest rates remain within the designated corridor.

The Monetary Policy aims to keep inflation in check at 6.5 percent by adopting measures to prevent excessive monetary expansion that could exert pressure on prices. By doing so, the central bank seeks to support a healthy economic environment for sustainable growth.

Recognizing the importance of directing fiscal resources towards the productive sector, the policy is aligned with the government's target of achieving a six percent economic growth rate for the current fiscal year. This strategic allocation of resources will fuel economic activities and boost development.

In terms of financial indicators, the policy envisions a 12.5 percent increase in broad money supply and an 11.5 percent rise in credit to the private sector from banks and financial institutions. This will facilitate capital flow into productive ventures, stimulating economic prosperity.

As part of its measures, Nepal Rastra Bank has adjusted the policy rate, while keeping the mandatory cash ratio and statutory liquidity ratio of banks and financial institutions unchanged. The bank rate has remained steady, but the bidding rate in deposit collection has been lowered to foster a conducive lending environment.

Taking into account the prevailing economic conditions, the policy rate has been reduced by 50 basis points to 6.5 percent, aimed at promoting investment and economic activities. The bank rate remains at 7.5 percent, ensuring financial stability, while the bidding rate in deposit collection has been decreased to enhance liquidity in the financial system.

To ensure effective implementation, the central bank will keep the secondary market transaction and bidding in deposit collection open, considering the weighted interbank interest rate as the operational target, aligning it between the bank rate and deposit collection rate.

Furthermore, the provision of permanent liquidity facility in the bank rate and overnight liquidity facility in the policy rate remains unchanged, providing essential support to financial institutions.

The Monetary Policy for 2023-24 also incorporates a provision for providing permanent deposit collection at the lower limit of the interest rate corridor, reinforcing the effectiveness of the interest rate framework.

In conclusion, the Nepal Rastra Bank's Monetary Policy for the current fiscal year aims to create a conducive financial environment, promote economic growth, and maintain stability, thereby paving the way for a prosperous future for the nation.