The document summarizes Nepal's monetary policy for fiscal year 2011/12. The policy aims to address current challenges like high inflation, the balance of payments deficit, and weak financial stability. Its objectives are to stabilize the financial sector, control inflation, maintain public confidence in the financial system, and minimize non-performing assets. The policy will use instruments like open market operations, reserve requirements, and interest rates to achieve targets of 7% inflation, a Rs. 5 billion balance of payments surplus, 5% economic growth, and 12.5% growth in money supply and bank deposits. The expected outcomes are improved balance of payments, contained inflation, maintained financial stability, increased access to banking, and facilitated economic growth.

1. Highlights of
Monetary Policy
For Fiscal Year 2011/12
Binamra Silwal
MBA III (Finance)

2. Contents
• What is Monetary Policy?
• Types and Goals/Objectives
Nepal Monetary Policy for F.Y. 2011/12
• Current Challenges
• Objectives
• Overview
• Economic and monetary Targets
• Instruments of Monetary Policy Operation
• Summary

3. What is Monetary Policy?
• Policy to manage supply of money
• Issued by Nepal Rastra Bank
• Achieve predetermined macro-
economic goals
• Policy affecting quantity of money
• Determines cost and availability of credit
• Create environment for economic
growth

4. Types of Monetary Policy
Expansionary
Contractionary

5. Goals/Objectives
Theoretically………..
Monetary Policy aims to achieve
• Higher Economic Growth
• Higher rate of employment
• Price stability
• Neutrality of money
• Economic Stability

6. Monetary policy
for
F.Y. 2011/12
Source:
Monetary Policy (in English) 2011-12 published by
Nepal Rastra Bank on July 21, 2011
(www.nrb.org.np)

7. Current Challenges:
• High Inflation rate
• Balance of payment deficit
• Liquidity management
• Maintenance of financial stability
• Weak corporate governance
• Low public confidence towards the
financial system

8. Objectives:
• Financial sector stability
• Control high inflation rate
• Maintain public confidence in the
financial system
• Minimize impact of an increase in NPA
• Maintain credit-deposit ratio within the ceiling
• Increase credit to productive sector
• Keeping the interest rate spread at a
satisfactory level

9. Overview
Outline of Financial indicators of F.Y. 2010/11
GDP Growth Rate 3.5%
Inflation Rate 9.6%
Increase in Govt. Expenditure
12.5%
Growth in Government Revenue 14.5%
Balance of Payments 1 Billion
Remittance Growth 10.8%
Increase in Export 5.6%

10. Overview (Contd.)
Increase Decrease
Total Consumption Economic growth
Foreign Employment Capital Expenditure
Wage Rate NEPSE Index
Remittance Bank Deposit Rate
Trade Deficit Liquid Asset

11. Economic and Monetary targets:
Maintain BOP and control inflation
Annual average inflation rate 7 percent
BOP surplus target (approx.) Rs. 5 billion
Economic growth rate 5 percent
Broad money supply growth 12.5 percent
Domestic credit growth (projected) 13.7 percent
Total deposits of commercial
12.5 percent
banks growth (projected)

12. Instruments of Monetary Policy
Operation
• Open market operation
• Liquidity Monitoring and Forecasting
Framework
• Cash reserve ratio (CRR)
• Statutory Liquidity Ratio (SLR)
• Bank rate
• Special Refinance rate

13. Summary
• Expected to address current challenges
• Improving the BOP imbalance
• Containing inflation rate
• Maintaining financial stability
• Increasing access of banking services
to general people
• Facilitating in the achievement of
targeted economic growth

14. Any Queries ?

15. Thank You !