Finance minister seeks amendment to Nepal Rastra Bank Act to make NRB more proactive, accountable
KATHMANDU: Finance Minister Dr Swarnim Wagle has said the Nepal Rastra Bank Act needs amendment to make the central bank more proactive and accountable.
Speaking at a meeting of the Finance Committee of the House of Representatives (HoR) on Tuesday, Dr Wagle emphasised that fiscal and monetary policy must work in tandem in an economy like Nepal’s and that effective coordination between the Ministry of Finance (MoF) and the Nepal Rastra Bank (NRB) is essential.
During a clause-by-clause discussion on the bill to amend the Nepal Rastra Bank Act, 2058, the minister said the proposal to have at least seven members on the central bank’s board of directors is appropriate, and that the presence of the finance secretary will become more important once the provision for direct instructions from the government is removed.
“In a country like Nepal, fiscal and monetary policy are like two wheels of the same cart. The MoF handles the fiscal policy, while the central bank manages the monetary policy. So, coordination between the two is essential,” he said.
Dr Wagle noted that because Nepal maintains a fixed exchange rate with the Indian currency, the central bank cannot pursue a fully independent monetary policy and that much of the country’s inflation is imported, limiting monetary policy tools.
Referring to the ‘Impossible Trinity’ in monetary economics, he said it is not possible to have a stable exchange rate, free capital flow and complete monetary independence simultaneously. He added that Nepal maintains a stable exchange rate while regulating capital flows, practising limited autonomy in its monetary policy.
The minister also said the central bank does not need three deputy governors and that two would suffice, given the separate structure for executive directors. He called for clearer qualifications for board members and for provisions to allow those who have served at executive level in international financial institutions to join the board, while urging a precise definition of 'executive level' to avoid confusion.
Dr Wagle said the board should ensure representation of experts from fields such as economics, monetary policy, banking, finance, management, public administration, law, statistics and mathematics.
(With inputs from RSS)
