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Senior leaders of the ruling coalition held a meeting at the Cityscape Apartment in Lalitpur on Wednesday. Prime Minister Pushpa Kamal Dahal and CPN (Unified Socialist) Chairman Madhav Kumar Nepal had reached there for the discussion. Dahal, CPN (Maoist Center) senior Vice-Chairman Narayankaji Shrestha and Nepal among others leaders discussed contemporary political issues. Dahal has been urging CPN-UML Chairman KP Sharma Oli and CPN (Unified Socialist) Chairman Nepal to join hands together. Prime Minister Dahal has been trying to arrange a meeting between them. Oli and Nepal held a dialogue for the first time during the swearing-in ceremony of the Prime Minister organized in Sheetal Niwas after the party split. According to a source, Nepal and UML Vice-Chairman Bishnu Paudel, who is also a Deputy Prime Minister and Finance Minister, held a meeting on Tuesday night to rope in the former’s party in the government. The ministers of the CPN (Unified Socialist) has been piling pressure on Nepal to create an environment to join the government. Earlier on Tuesday, Nepal said that Dahal became the prime minister without informing him. “Dahal became the prime minister without informing our party. We came to know only after seeing his photo in the newspaper,” he said, adding, “I am disappointed with the behavior of Dahal. We became the victim of both Nepali Congress and Maoist Center.”  

With the formation of the new government, the private sector has become active to apprise the country's leadership about the state of the recession-mired economy. On Tuesday a Federation of Nepalese Chambers and Industry (FNCCI) delegation met with Prime Minister Pushpa Kamal Dahal and Finance Minister Bishnu Paudel. Anjan Shrestha, Vice President of FNCCI was also part of the delegation. ApEx talked to Shrestha about the meetings and the demands and suggestions of FNCCI to bring the derailed economy back on track. Excerpts: How do you expect the new government to address the country's economic woes? Revitalizing the economy should be the top priority of the government. Neither the private sector nor the government or the general public can bear the brunt of the crisis anymore. There will be more problems in the economy in the coming days if the problems go unaddressed. Hence, the government needs to pay heed to the suggestions of the private sector and work proactively to resolve the issues. What issues were raised by the FNCCI delegation in the meeting with newly appointed Prime Minister Pushpa Kamal Dahal on Tuesday?  As the country's economy is in crisis, we met the new Prime Minister to apprise him about the state of the economy and private sector. We also suggested possible steps the government should take to bring the economy on the right track. We are surrounded by the liquidity crisis in the market which has led to interest rates remaining persistently higher and has contributed to the sharp contraction in business activities. The money cycle in the market has been badly affected. How serious is the new PM to address the private sector's concerns? The PM told us that he understands the problems surrounding the economy and our concerns and stressed that reviving the economy is the government's first priority. He said the very first meeting of the Council of Ministers has made a special decision in this regard.  FNCCI also met Finance Minister Bishnu Poudel on Tuesday. What was the private sector's main agenda and what was his response? We found that he understands the problems in the economy. He told us that the government and private sector are complementary to each other. We have clearly stated our demands and have suggested ways to end the economic slowdown. We hope the new government will work seriously to take the country’s economy out of the slump.  FNCCI has been strongly demanding the deferral of the guidelines on working capital loans. How does the private sector not want this monetary arrangement to be implemented? The postponement of guidelines on working capital loans is our main demand. Given the current situation where most business activities have almost stagnated, it is not possible to implement the guidelines. So, we have been demanding that its implementation should be deferred by at least two years. What is the current status revenue collection ?  The government's revenue collection has declined mainly due to weakening demands and a slowdown in business activities. The businessmen are struggling to repay the banks' interest rates and loan installments. Hence, our demand is to extend the deadline. Automobiles are one of the major verticals of your business group. The government has recently lifted restrictions on automobile imports. Have importers started to open Letters of Credit (LC) to import vehicles? Importers are gradually opening the LCs after the government lifted import restrictions. However, there is no enthusiasm in the automobile sector at the moment. Except for electric vehicles, the demand is depressed in the market. The automobile business will not bounce back until there is sufficient liquidity in the banking system to finance the auto loans.

The price of gold has increased by Rs 400 per tola in the domestic market on Wednesday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 101, 100 per tola today. It was traded at Rs 100, 700 on Tuesday. Meanwhile, tejabi gold is being traded at Rs 100, 600 per tola. Similarly, the price of silver is increased by Rs 10 and is being traded at Rs 1, 400 per tola today.

Prime Minister and CPN (Maoist Center) Chairman Pushpa Kamal Dahal and CPN-UML Chairman held a meeting on Wednesday. Oli had reached Khumaltar to meet Dahal this afternoon. Dahal became the prime minister for the third time with the support of UML Chairman Oli. Though Dahal became the prime minister, they are yet to make a decision on the distribution of many important posts. The UML will get the post of President and Speaker. The Maoist Center, who got the post of prime minister, will get the post of Vice-President and Rastriya Swatantra Party will get Deputy Speaker. This is the first time that Oli reached Khumaltar today after the alliance of UML-Maoist Center. Preparations are also underway to rope in Madhav Kumar Nepal-led CPN (Unified Socialist) in the ruling coalition.

In a much-needed respite to the banks and financial institutions (BFIs) stricken by a deeper liquidity crunch, the government has allowed banks to consider the majority of reserves funds of local government as bank deposits till the end of the current fiscal year. In December last year, the government decided to allow the commercial banks to count up to 80 percent of the reserve funds of the local governments deposited in commercial banks as deposits till the end of the last fiscal year 2021/22. Earlier, only 50 percent of such funds could be counted as deposits. In September this year, the deadline for counting such funds as deposits was extended further till mid-January 2023. The measure helped commercial banks to keep their credit-to-deposit (CD) ratio to the regulatory limit of 90 percent. With the banking sector continuing to face a shortage of loanable funds which resulted in surging interest rates in recent months, the government decided to extend the deadline further till the end of the current fiscal year. “The Ministry of Finance made such a decision early this week,” a senior official of Nepal Rastra Bank said. “This is expected to help the banks from getting their liquidity further.” The monetary arrangement, which allows banks to consider the reserve funds of the local governments as deposits, has helped banks to count the funds of local governments of over Rs 100bn as liquidity, according to the central bank. The non-extension of the deadline would have caused havoc in the liquidity position of banks by the middle of January next year when people are likely to withdraw a large chunk of money from the banks and financial institutions to pay the first installment of income tax. As per the Income Tax Act, taxpayers are required to pay income tax in three installments in January, April, and July. As a result of the excessive lending in the early months of last fiscal year, the banking sector faced a liquidity crunch as deposits could not grow in proportion to the lending. According to the central bank, there has been some improvement in liquidity in the last few months as the CD ratio has come down to around 86 percent. BFIs have hardly issued new loans while there has been a marked improvement in deposit collection due to an increased inflow of remittances as well as increasing government spending. NRB data show that nearly Rs 100bn has been collected by banks as deposits since the start of the second quarter of this fiscal year while the banks and financial institutions have lent around just Rs 3bn. “The latest trend of deposit and lending has helped to bridge the gap created by higher lending and lower deposit collection in the past,” the NRB official said. The liquidity is expected to be eased relatively in the second half of the current fiscal year provided the remittance inflows continue to increase and government spending also picks up. The government’s capital spending also usually increases in the second half of the fiscal year which will help bring cash into the banking system easing the liquidity crunch. As of December 26, capital expenditure is just over 10 percent, according to the Financial Comptroller General Office. “As development activities will pick up in the second half of fiscal, there will be a rise in capital expenditure which will help improve the liquidity situation of the banking sector,” the NRB official said.

The country's stock market has responded positively to the formation of a new government and the appointment of Bishnu Poudel as the new Finance Minister. With Poudel taking charge of the Ministry of Finance for the third time, the Nepal Stock Exchange (Nepse) surged by 116.74 points in the last two trading days. The benchmark index rose to a four-month high on Tuesday while daily turnover increased to a five-month high. The index which jumped by 56.87 points on Monday, surged by 59.86 points on Tuesday to close at 1983.95 points. The daily turnover at Nepse has also improved significantly on Monday and Tuesday. Nepse saw a daily turnover of Rs 3.88bn on Tuesday, an increase of 85.64 percent compared to Monday. The daily turnover at Nepse in the past few weeks was around Rs 1bn or less. On Tuesday, 202 companies’ share prices recorded gains while eight were the losers. The stock market started to go upward from the early trading on Monday after media outlets began to circulate the news of Poudel becoming Finance Minister. What drove the market in an upward trajectory on Monday and Tuesday was Poudel’s previous tenure as Finance Minister. The domestic stock market had hit an all-time high during both tenures of Poudel—first in 2015 and second in 2020. Investors are now expecting the same in Poudel’s third tenure. In 2015, Nepse reached over 1,800 for the first time, and in 2020, during the end of the tenure of Poudel as the finance minister, the bourse hit an all-time high crossing 3,200 points. The stock market has been on a bearish run for over a year after Nepal Rastra Bank (NRB) tightened the margin lending, and liquidity crunch and high-interest rates hit the banking system. The stock market made massive gains as investors await steps Poudel will take to bring back the confidence of stock investors. It is yet to be seen if the market continues the gains of Monday and Tuesday. “With the appointment of Bishnu Paudel as the finance minister, investors have regained their confidence,” said Tulsi Ram Dhakal, a stock investor. According to him, given the past tenures of Poudel as the finance minister, investors have hoped the government will bring policy reforms. On Tuesday, minister Paudel met some leaders of investors’ associations and assured them to work to address the problems in the country's capital market.

The two-way trade between Nepal and China has resumed through the Kerung/Rasuwagadhi border point from Wednesday. Six cargo trucks loaded with Nepali goods passed through the border point into China amidst a ceremony today. The trade between the two countries has been shut since the start of the Covid-19 pandemic in 2020. Nepali businessmen and traders, who were hit hard by the pandemic, had been demanding resumption of the border point.

Hard hit by the persistently high interest rates, a prolonged liquidity crunch, and a sharp slowdown in business activities, the country's private sector bodies have swung into action to get their voice heard by the new dispensation in the Singhadurbar. On the top of their agenda is the postponement of the guidelines on working capital loans introduced by Nepal Rastra Bank. The two leading private sector organizations - The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industry (CNI)- separately met Prime Minister Pushpa Kamal Dahal at his residence on Tuesday morning. The FNCCI and CNI delegations also met Finance Minister Bishnu Poudel later in the afternoon. The FNCCI delegation led by its President Shekhar Golchha apprised the PM about the difficulties faced by the private sector as well as the current state of the country's economy. During the meeting, Golchha raised the issue of postponement of the guideline on working capital loans and stressed the need for interest rate stability. The private sector has been lobbying hard for the postponement of the working capital loans guidelines by at least two years. PM Dahal assured FNCCI delegates saying that he is also studying the past suggestions of FNCCI and that initiatives will be taken to resolve the problems soon with the cooperation between the Finance Ministry, Nepal Rastra Bank, and the private sector. The CNI team led by its President Vishnu Agrawal presented a concept note on 'Rebooting Nepalese Economy' along with the clear steps to be initiated immediately in order to revive the country's economy. CNI has also suggested measures that can be taken immediately by prioritizing the financial sector (liquidity crisis and high-interest rates), industrial promotion, infrastructure, tourism, energy, and information technology sectors to give momentum to the Nepali economy. "We have prioritized the economic recovery from the very first meeting of the Council of Ministers. We will be moving ahead in collaboration with the private sector," remarked PM Dahal meeting with the CNI team. CNI office bearers also met finance minister Paudel and suggested that the government take steps to bring down bank interest rates by 2 percent and defer the guidelines on working capital by two years to raise the confidence of the private sector. CNI President Agrawal urged the finance minister to implement the six unimplemented industrial zones on the model of India's Rudrapur Industrial Zone as soon as possible through the public-private partnership to encourage import-substituting industries.