Finance Minister Sees Need of Amending NRB Act

Finance Minister Dr. Swarnim Wagle has said that it is necessary to amend the act in order to make the Nepal Rastra Bank more proactive and accountable.

Addressing to the meeting of the Finance Committee under the House of Representatives today, he pointed out to the need of amending the related act to make the public entity further effective and accountable.

During the clause-by-clause discussion on the bill to amend the Nepal Rastra Bank Act, 2058, Dr. Wagle emphasized that in an economy like Nepal’s, fiscal policy and monetary policy complement each other, making effective coordination between the Ministry of Finance and the Nepal Rastra Bank essential.

The Finance Minister stated that the proposal to have at least seven members in the central bank’s board of directors is appropriate, and he felt that the presence of the finance secretary would become even more important once the provision for direct instructions from the Nepal government is removed.

“In a country like Nepal, fiscal and monetary policy are like two wheels of the same cart. The Ministry of Finance handles the fiscal policy, while the central bank manages the monetary policy. So, coordination between the two is essential,” he said.

Finance Minister Dr. Wagle mentioned that since Nepal has maintained a fixed exchange rate with the Indian currency, the central bank is not in a position to fully carry out an independent monetary policy. He also said that Nepal’s inflation is largely imported, so the tools of monetary policy are limited.

Referring to the concept of the ‘Impossible Trinity’ commonly discussed in monetary economics, Minister Dr. Wagle mentioned that having a stable exchange rate, free capital flow, and complete independent monetary policy all at the same time is not possible.

He clarified that Nepal is maintaining a stable exchange rate while regulating capital flows in a certain way, thus practicing limited autonomy in its monetary policy.

During the discussion, Finance Minister Dr. Wagle opined that the central bank doesn’t need three deputy governors and said that two deputy governors are enough. According to him, since there is a separate structure for executive directors (EDs) in the central bank, there is no need for additional deputy governors.

He mentioned that some amendments are needed regarding the qualifications of the board members. Similarly, he suggested that there should be a clear provision to give opportunities to people who have worked at the executive level in international financial institutions to join the board.

Minister Wagle mentioned that since the definition of the ‘executive level’ is not clear, it could create confusion in interpretation, so it needs to be clearly defined.

He also emphasized that in a specialized institution like the central bank, the board of directors should ensure the representation of experts from various fields such as economics, monetary policy, banking, finance, management, public administration, law, statistics, and mathematics. (RSS)