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On the occasion of the 28th anniversary of the Society of Economic Journalists-Nepal (SEJAN), an interaction on managing the economy highlighted the importance of leveraging Nepal’s first sovereign credit rating. Speaking at the event held in Kathmandu on Saturday, economic stakeholders emphasized the need for strategic action to capitalize on the nation’s BB- credit rating, describing it as encouraging and full of potential benefits.  

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel hailed the sovereign credit assessment results as a matter of national pride, placing Nepal second in South Asia after India. Stressing the need to turn this achievement into tangible outcomes, he urged constructive criticism of the government and acknowledged responsibility for any recent economic challenges. “If issues have arisen since this government took office, I take responsibility,” he said, adding that positive developments and signs of progress are visible. He emphasized creating a conducive business environment to uplift private sector morale, warning that political instability remains a significant obstacle.  

Shivraj Adhikari, Vice-chairperson of the National Planning Commission, noted that Nepal’s sovereign credit rating has sparked a constructive debate and called for the discussion to focus on reform. He stressed the importance of identifying investment opportunities and fostering more dynamic economic discourse.  

Nepal Rastra Bank Governor Maha Prasad Adhikari acknowledged Nepal’s credit rating as a positive achievement but highlighted lingering economic challenges. He called for a balanced approach, emphasizing that dependence on monetary policy alone is insufficient. “All state agencies must contribute equally to correct the current situation,” he said.  

Economist Achyut Wagle criticized the government for its failure to identify new revenue sources, which he said weakens the state. Highlighting the decline in revenue as a percentage of GDP—from 24–25 percent to 12–13 percent—he expressed concerns over inadequate attention to non-financial management.  

Representatives from the private sector underscored the need for government action to raise their morale, despite some positive economic indicators. Sunil KC, President of the Nepal Bankers’ Association, described the credit rating as a remarkable achievement under challenging circumstances and urged the government to sustain it.  

Kamlesh Agarwal, President of the Nepal Chamber of Commerce, pointed to historical issues as the main factor behind the sector’s current challenges. Similarly, Rajesh Kumar Agarwal, President of the Confederation of Nepalese Industries, identified the economic slowdown as a pressing problem and suggested revisiting past policies to address unresolved issues.  

Chandra Prasad Dhakal, President of the Federation of Nepalese Chambers of Commerce and Industry, highlighted the private sector’s role in the government’s economic reform initiatives. He emphasized the need to review import restrictions, stating that such measures alone would not resolve the country’s economic problems.

The Nepal Stock Exchange (NEPSE) gained 17.80 points to close at 2,775.85 points on Tuesday.

The sensitive index, however, plunged by 0.58 points to close at 471. 21 points.

A total of 18,160,634-unit shares of 307 companies were traded for Rs 8. 52 billion.

Meanwhile, Dibyashwori Hydropower Ltd. (DHPL) and Ingwa Hydropower Limited (IHL) were the top gainers today, with their price surging by 10. 00 percent. Likewise, Upper Syange Hydropower Limited (USHL) was the top loser as its price fell by 9.51 percent.

At the end of the day, total market capitalization stood at Rs 4. 60 trillion.

Confederation of Nepalese Industries (CNI) President Rajesh Kumar Agrawal has said the country’s economy is passing through difficult times despite positive indicators on the external sector. “Our foreign currency reserves appear stable, and the country enjoys relative comfort in goods and services imports. Inflation remains controlled, and interest rates have shown a downward trend,” Agrawal said. “However, the country’s private sector is suffering. GDP growth for the previous year was a modest 3.87 percent, with production and construction sectors demonstrating negative growth trajectories. Most critically, industries are operating at a mere 30-40 percent of their potential capacity, signaling significant economic distress.”

Agrawal identified several key challenges driving this economic slowdown. “Declining imports and exports are exerting considerable pressure on government revenues. The policy measures implemented to control international inflation and manage foreign currency reserves have inadvertently contributed to a substantial reduction in overall economic demand,” he said. “We are currently experiencing a policy-induced economic slowdown. It is absolutely critical to bring the economy out of this situation.”

Agrawal demanded proactive government intervention to cure these ills. Commending the finance ministry for including private sector representatives in the High-level Economic Sector Reform Committee led by former finance secretary Rameshore Khanal, Agrawal said the collaborative approach is crucial for developing comprehensive economic revival strategies.

He urged the government for economic reforms to reinvigorate the economy. “The current policies focused on reducing must be fundamentally reimagined. The focus should shift towards stimulating demand, which is currently at critically low levels. This demand contraction is creating a cascading effect, negatively impacting industries, creating liquidity challenges for financial institutions, and contributing to increased non-performing assets,” the CNI President added. 

Agrawal also criticized the management of institutional funds. “Funds of entities like Employees Provident Fund (EPF), Citizen Investment Trust (CIT) and Social Security Funds are currently parked in bank deposits which deliver low returns. These funds should be utilized to develop critical infrastructure projects,” Agrawal said, urging the government to increase its capital expenses significantly.

Agrawal called for a multi-dimensional approach involving short-term, medium-term, and long-term policy interventions to revitalize Nepali economy. “There should be an ecosystem that supports business growth, encourages investment and stimulates economic activity,” he added. 

He also called for strategic, forward-thinking economic policies that can revive, reinvigorate and propel Nepal’s economic landscape towards sustainable growth.

In a continued effort to manage the country’s financial system, Nepal Rastra Bank (NRB) absorbed
Rs 50bn from the market through a 21-day deposit collection auction on Sunday. This is the central bank’s second major liquidity absorption in recent weeks. The NRB mopped up Rs 100bn liquidity from the banking system on Nov 27. 

According to bankers and the central bank data, the banking system currently holds an unprecedented Rs 760bn in investable funds. Investable funds of banks and financial institutions are expanding in recent months with deposit collection consistently outpacing credit disbursement. 

Experts say this liquidity glut is symptomatic of broader economic challenges including weak economic activity that has significantly reduced demand for goods and services. The reduced economic activities have had cascading effects on the economy. Reduced consumer and business spending has led to decreased import volumes, which has directly impacted government revenue collection. This has forced the government to rely on public debt even to pay the salary of government employees.

Despite the central bank’s efforts to stimulate economic activity by easing monetary policy for the current fiscal year, credit demand has shown minimal improvement. As a result, the central bank kept policy rates unchanged in the first quarter review of the monetary policy for the current fiscal year on Friday. According to the central bank, the bank rate and policy rate have been maintained at 6.5 percent and five percent, respectively. The NRB has also kept the credit-deposit ratio, statutory liquidity ratio and cash reserve ratio unchanged.

The low demand for bank credit amid a slowdown in economic activities has driven interest rates to record lows. The average loan interest rate has dropped to 9.33 percent while the average deposit rate sits at 5.44 percent. Most commercial banks are now offering loans within an 8-9 percent interest rate range for the month of Mangsir (mid-November to mid-December).

The interbank lending rate has also declined to three percent. NRB starts mopping up liquidity from the market when interbank lending rate comes down to three percent, to prevent further rate erosion. The deposit collection auction is one of the important tools that the central bank has been deploying to absorb excess liquidity. Banks also have the option to park their surplus funds in the permanent deposit facility, which offers a fixed three percent interest rate.