Monetary Policy after the Financial Crisis

June 7, 2020, Kathmandu

The world right now is witnessing a tragic pandemic. As we talk, many are dying from the global pandemic – the coronavirus. The viral virus is still conquering in many areas of the globe. Meanwhile, we are trying to contain the epidemic by social distancing. Lives are at stake, health supplies are not sufficient, and the economy is falling. However, we humans are trying to fight COVID-19 as well as recover from its wounds. Monetary policy after the financial crisis of 2020 is the major strategy we have against the virus. Let’s learn how Nepal is planning its monetary policies on the occasion of Nepal Budget for 2077/2078.

What is Monetary Policy?

Normally, the central bank of the nation formulates plans and strategies to control & manage the money supply for the economic growth of the country. In our case, Nepal Rastra Bank (NRB) formulates such policies.

On the occasion of publishing the Annual Budget 2077/2078 by the Nepal Government and NRB, the focus has been inspired by the crisis caused by the coronavirus. Therefore calling the budget as the monetary policy after the financial crisis of 2020.

Monetary Policy after the Financial Crisis of 2020

Finance Minister, Dr. YubRaj Khatiwada on May 29, 2020, presented a federal budget for the fiscal year 2077/2078 of a massive NPR 1.474 trillion. Being very aware of the tragedy caused by the coronavirus, this budget is more focused on the Health Sector, Agriculture Sector, and Digital Sector of Nepal.

If you’re wondering how the nation is planning to source such a huge amount, here’s a small demonstration:

For the 1.474 trillion sourcing, the government plans to earn 890 billion from domestic revenue such as tax, 61 billion from the foreign grant. Meanwhile, the remaining 525 billion to source as a 300 billion loan from foreign associations and 225 billion from domestic associations.

Budget Allocation for Digital Nepal (Major Highlights)

  • Expanding Digital Banking: The government aims to expand branchless banking, mobile banking, and internet banking to remote areas and provide banking and financial services through electronic methods.
  • National Payment Gateway: Learning the importance of cashless transactions during the lockdown, National Payment Gateway will come into operation.
  • Digital Capital Market: Another major budget policy is on making Nepal Stock Exchange (NEPSE) fully digital. Moreover, this plan formulates starting the 2077/2078 fiscal year!
  • Digital Education: Taking into consideration how COVID 19 affected the education of the young generation, the government is also planning to digitize education through the internet, television, and radio.

Budget Allocation for Health Sector

  • NPR of 6 billion is allocated for medicine, medical tools, and medical equipment.
  • To ensure the safety of health workers, Personal Protective Equipment (PPE), and free health insurance of NPR 0.5 Million.
  • For the development of new infrastructure and new hospitals, a budget policy of69 Billion.
  • 40% of every local level population will receive health insurance by the end of the fiscal year. For this, the money supply is NPR 7.5 Billion.
  • Also, mandatory health checkups for any person visiting Nepal.

Budget Allocation for Agriculture Sector

  • NPR 3.6 Billion to provide credit for people working in the Agriculture sector and for generating employment opportunities.
  • NPR of 1 Billion as a loan at 5% to the agriculture sector that is affected by the coronavirus.
  • Reduction in customs duty on import of raw materials by micro, cottage & small scale industries, Animal Husbandries, etc.
  • Planning to employ 1, 50,000 Nepalese in the Agriculture sector.
  • Organic Farming will receive promotion and support for Branding & Commercializing.
  • Moreover, Kathmandu’s Chobar will install a HUB market!
  • Reduction in customs duty on import of vegetable seeds.

Other major monetary policies in the 2077/2078 budget include:

  • Corona affected the tourism industry will receive a loan at 5% for recovery. The budget for this policy is NPR 50 Billion.
  • To promote startups and domestic employment, a loan at 2% interest rate for entrepreneurs. For this, the budget is NPR 0.5 Billion.
  • Company registration and dissolution procedures will be easier for new companies to come and old to go.
  • In addition, 7 Billion Funds for Scholarships and educating Nepalese.

Likewise, there are plenty of new policies that are all set to fight the crisis of 2020. They say every great nation needs to go through a breaking point to rise like a phoenix, this financial and health crisis may be that for Nepal.

The budget allocation looks promising and there is hope but the bigger question is,

“Will Nepal rise back by fighting the financial crisis of 2020?”

Also, Read: Government to implement National Payment Gateway from FY 77/78


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