Governor: Lending Without Fiscal Policy Support Only Inflates Asset Prices
Nepal Rastra Bank Governor Prof. Dr. Bishwanath Poudel stated that attempting to manage liquidity by expanding credit through monetary policy alone will only lead to an increase in asset prices. He explained that monetary policy would be more manageable if credit expansion for investment were based on fiscal policy. The Governor emphasized that discussing monetary policies is crucial, particularly concerning the stock market and real estate sectors. Without proper coordination between fiscal and monetary policies, efforts to control inflation and manage the economy can be undermined. He suggested that a balanced approach, integrating both policy tools, is essential for sustainable economic growth and stability. The current economic climate requires careful consideration of how credit is extended and managed to avoid speculative bubbles. The central bank aims to ensure that credit expansion supports productive sectors rather than solely inflating asset values. This approach is intended to foster a more stable and equitable economic environment for Nepal.
The Governor's statement highlights a potential disconnect between monetary and fiscal policy objectives in Nepal. Expanding credit solely through monetary measures, without corresponding fiscal support, risks inflating asset bubbles rather than stimulating genuine economic productivity. This approach could exacerbate wealth inequality, as those with existing assets benefit disproportionately from rising prices. A more integrated policy framework is necessary to ensure that credit expansion is directed towards productive investments that foster sustainable growth and employment. Over-reliance on monetary policy for liquidity management, without addressing underlying fiscal imbalances or structural economic issues, may prove to be an ineffective long-term strategy, potentially leading to financial instability in the future.
AI-generated to prompt reflection — not editorial opinion, not advice, not a statement of fact. How this works.