News Digest: Economy and Development (November 25 –December 01, 2021)


Money and Banking

Nepal Rastra Bank (NRB) has adopted a new policy to tighten the increasing imports via revisions in the monetary policy for the current fiscal year (FY) 2021/22. According to the policy revision, NRB has made it mandatory to deposit cash in banks while opening letter of credit (LC) for the import of foreign goods and services. The policy revision comes at a time when the central bank is facing acute fall in foreign currency reserves due to a bloated import bill.

The highly claimed credit scheme ‘Business Continuity Credit Plan’ aimed at reviving Covid-19 affected businesses has failed in granting even a single loan to businesses targeted by it in the current fiscal year (FY) 2021/22. According to the central bank (NRB) the scheme whose operation was handed over to Rastriya Banijya Bank (RBB) has remained subdued. Comparing it to the last fiscal, 12 companies had availed the credit facility as provided by RBB. However, businesses and enterprises are yet to avail the same due to strict borrowing conditions under the credit plan in the current fiscal.

The central bank (NRB) on 25 November issued a repurchase agreement (repo) worth Nrs. 20 billion (USD 166 million) maturing on 08 December 2021. NRB issued the repo in a bid to avoid further shortage of investment capital (liquidity crunch) in banks and financial institution (BFIs) across the nation.

Agriculture and Farming

The government has approved the guidelines for cash distribution targeted towards paddy farmers who suffered heavy losses due to the unseasonal rainfall and flooding’s in October. According to the Ministry of Agriculture, Livestock and Development (MoALD), the maximum compensation amount has been fixed at Nrs. 55,000 (USD 458.46). Similarly, the ministry has also divided the cash compensation into three different categories with the government compensating 65 percent, 30 percent, 20 percent of the production cost for farmers who hold up to 10 katthas, 11 to 60 katthas and more than 61 katthas, respectively.

Farmers across districts including Morang, Sunsari and Jhapa are scrambling for nitrogen fertilizer as planting season fades. According to the Agriculture Ministry of province 1, out of the province’s requirement of 8,000 tonnes, the province only received 4,500 tonnes from the state-owned Agriculture Inputs Company (AIC). This has resulted in supply constraint alongside forcing farmers to buy the required product at a higher price.

Business and Market

Finance Minister Janardan Sharma expressed his dissatisfaction over the meager capital expenditure and stressed on the need to adopt a new system to increase spending across the nation. Speaking at an event organized by the Ministry of Local Development (MoLD), Sharma while reviewing the progress made during the first quarter of the current fiscal year (FY) 2021/22 also stressed on the need to reduce the imports bill (particularly import of bullion) and encouraged the use of digital payment and services.

According to the Department of Commerce, Supplies and Consumer Protection, the department has managed to carry out monitoring of 1,355 trade and business firms during the first four months of the current fiscal year (FY) 2021/22. The monitoring enabled the department to collect a revenue of Nrs. 7.11 million (USD 59,266.20) from businesses and enterprises who were involved in unfair trade practices.

Department of Industry (DoI) reported a record-high registration of new firms – mostly micro, cottage and small-scale enterprises during the last fiscal year (FY) 2021/22. According to DoI’s new data, a total of 83,386 firms were registered in the last fiscal ending mid-July 2021, with most new industries being registered in the agriculture and forestry categories.

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