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Nepal Rastra Bank has started preparations for the formulation of monetary policy for the fiscal year 2025-26. The newly-formed Monetary Policy Committee has an uphill task of focusing on global practices, the context of Nepal and the path that it should take in the coming days against the backdrop of permanent pegging of Nepali currency with Indian currency and the absence of good governance in the country.

What is a monetary policy? 

Before delving further, let’s begin with a key question: what is monetary policy?

Monetary policy is related to monetary or currency matters such as cash reserve ratio, statutory liquidity ratio, open market operations, repurchase obligations. It affects the money supply in the economy. 

Who drafts the monetary policy? The central bank of a country—the Nepal Rastra Bank in the case of our country. 

When talking about this policy, another related policy also comes to mind and that’s fiscal policy. This policy is used to monitor and influence the economy of a nation.

Fiscal policy is the “sister strategy” of monetary policy through which the central bank influences the money supply of the nation. Formulated by the Ministry of Finance, it deals with fiscal matters such as government revenue (tax policies, non-tax matters like disinvestment, debt collection, service charges, etc) and expenditure matters—grants, salaries, pensions, money spent on creating capital assets like roads, bridges and the like).

The twin policies deal with inflation (the rate of increase in prices over a given period of time). The main objectives of monetary policy are as follows:

To check inflation or deflation (increase and fall in prices, respectively) or price stability in the country, to safeguard the country’s gold reserves, exchange rate stability, elimination of cyclical fluctuations, achievement of full employment and accelerating economic growth, etc.

Dealing with inflation: A tight monetary policy that reduces money supply in the system—that is one way of dealing with escalating prices.

Dealing with devaluation: This is done by increasing money supply in the system, by adopting an easy money policy and a cheap money policy.

When the economy is devastated by a war or hampered by a recession, a dispute or disruption in the economic horizon is very beneficial. In such situations, a country may adopt a dear/cheap money policy.

There is also a distinct difficulty and confusion when it comes to grasping monetary policy. Some people tend to think that dear money means that its value is high in terms of goods and services i.e prices are low while some others think cheap money means that the value of money is low and prices have increased.

Which money policy is better: It all depends on the economic situation facing a country. Interest rate is an important tool for the implementation of an economic policy. There are times when an economic policy demands that the interest rate in the money market be kept low and sometimes it demands that the interest rate be kept high for fulfilling certain economic objectives.

After this discussion, we are now in a position where we can classify these two policies based on their respective uses. We can say that we can identify the time and reason i.e when and why we use one of these two policies.

A tight money policy is preferred when the balance of payments is heavy against the country or is in danger of remaining unfavorable and when there is reckless or unwise investment from industries/industrialists and when credit creation by the banks exceeds all prudent limits.

Limitations: Monetary policy has to face many difficulties, especially in underdeveloped countries like Nepal. The existence of a large non-monetized sector—one-third of the economy in underdeveloped countries—can seriously limit the scope of use of monetary weapons, but two-thirds of the economy provides a fairly large opportunity for monetary action. Moreover, in such countries, currency occupies a relatively more important place than bank deposits. 

With rising water levels in major rivers and accelerated snowmelt following the onset of the monsoon, power generation by hydropower projects in the country is gradually increasing, enabling the country to resume power exports to India and Bangladesh. 

According to Nepal Electricity Authority (NEA), daily exports have now reached 350 MW. Of this, 40 MW is being sent to Bangladesh via India, and the remaining is being exported to various Indian states including Haryana and Bihar. Since Sunday, NEA has been exporting 200 MW and 80 MW, respectively, to the Indian states of Haryana and Bihar. Additionally, it has been supplying up to 30 MW daily to the Indian power exchange market.

Nepal has received permission to export up to 940 MW in total—400 MW under a medium-term bilateral agreement and 540 MW through the Indian Energy Exchange (IEX). Although 125 MW is approved for export to Bihar, only 80 MW is currently being utilized. Similarly, exports to Haryana are expected to increase to the full 235 MW approval in the coming weeks.

NEA plans to resume export of the full 940 MW by the first week of July.

Electricity exports to Bangladesh resumed on Saturday night under a trilateral agreement between Nepal, India and Bangladesh. Nepal is now exporting 40 MW to Bangladesh via the Dhalkebar-Muzaffarpur 400 kV transmission line. The electricity is sourced from Trishuli and Chilime hydropower projects. NEA estimates this export will generate monthly revenue of Rs 250m for Nepal, or Rs 1.25bn over five months.

Nepal, India and Bangladesh signed a tripartite agreement for power exports to Bangladesh in October last year. To begin with, Nepal is exporting 40 MW. Bangladesh has expressed interest to develop a reservoir-type power plant in Nepal in partnership with Nepal for a long-term energy partnership.

Unlike Nepal-India energy trade, which is settled in Indian currency, Bangladesh is paying Nepal in US dollars. The cost per unit is 6.4 cents. Bangladesh also bears the transmission loss and costs incurred within India, while NEA covers the losses within Nepal.

In the first five months of 2024-25, Nepal exported electricity worth Rs 13.4bn to India.

Although Nepal has a total installed capacity of 3,602 MW, actual generation stands at around 2,300 MW right now. Domestic demand hovers around 1,900 MW.

Urban forests, parks, and ponds could lower Kathmandu’s temperature by as much as 1.6°C if implemented strategically, according to a new study published in the journal Urban Climate. The research represents the first of its kind to closely examine how different types of blue-green spaces help cool down areas across the Kathmandu Valley.

The study, carried out by an international team from seven institutions, looked at 301 parks, 130 urban forest patches, and 26 ponds within the valley’s high-density urban areas using satellite-based information and Machine Learning algorithms. The study shows that Swoyambhu forest stayed cooler at 31.9°C, while nearby city areas reached 36.0°C—a difference of 4.1°C. At UN Park, the temperature was 34.3°C, compared to 38.2°C in the surrounding buildings, a difference of 3.9 °C. A traditional pond, Na Pukhu, in Bhaktapur measured 39.6°C, while the nearby urban area hit 42.5°C, the study found. 

The number represents the highest cooling effects recorded over five summers, highlighting how much these blue-green spaces can help during the hottest times. It is important to note that the satellite temperature estimates give an idea of the ground temperatures but still need to be confirmed with actual measurements on the ground. However, the differences they show help us understand important cooling patterns.

Overall, urban forests provide the greatest cooling effect, lowering temperatures by up to 1.2°C on average. Parks come next, cooling by up to 0.9°C, and ponds can reduce temperatures by up to 0.85°C.  But how well these spaces cool depends a lot on their surroundings. In vegetation-dominated areas, blue-green spaces can cool temperatures by as much as 1.6°C, while in densely built areas, the cooling effect drops to just 0.3-0.6°C. 

Lead researcher Saurav Bhattarai, a PhD student at Jackson State University, USA and an ORISE fellow, said the findings show that effective cooling strategies should be tailored to specific urban contexts. “Just adding green spaces is not enough; they need to be carefully designed and well integrated with the surrounding city environment,” he explained.

This study comes at a time when the Kathmandu Valley is getting steadily warmer, with temperatures rising by 0.38°C per decade since 1976. 

The study also found that soil moisture in the valley has dropped by an average of 2.1 percent over the past decade, with some central urban areas experiencing reductions as high as 35 percent.

Dr Rocky Talchabhadel from Jackson State University stressed the need for urgent action. “Our study shows that Kathmandu’s high-density areas are at greater risk from extreme heat. Without immediate action, these urban heat islands will only get worse,” he said.

Urban forests demonstrated the strongest relationship between their size and cooling effect—when the forest area doubles, the cooling effect increases by about 30 percent.  Parks showed moderate connection between size and cooling, but how well they cool depends more on how they are designed inside, not just their size. 

Park landscape design reveals that tree canopy coverage proves most critical for cooling effectiveness. In small parks, a one percent increase in high canopy area corresponded to an approximate 0.99°C increase in cooling effect. For the largest parks, high canopy coverage demonstrated substantial impact, with a one percent increase linked to a 1.76°C increase in cooling effect.

Prof Vishnu Prasad Pandey from Tribhuvan University noted that strategic placement and design of blue-green spaces can maximize cooling benefits even in space-constrained urban areas. “This isn’t just about planting more trees. The internal composition of parks—the ratio of tree canopy, grass and impervious surfaces—determines their cooling effectiveness more than their size alone,” he said.

The research team recommends different approaches for different urban zones. For dense urban cores, priority should be given to water features and rooftop solutions, including cisterns, reflective pools, green roofs and rooftop farming, while safeguarding existing mature trees. For transitional areas, the focus should be on expanding forest patches and designing parks with high, contiguous tree-canopy cover to maximize shade. In vegetation-dominated zones, conservation of current forests and green buffers can prevent future urban heat island formation.

Dr Prajal Pradhan from the University of Groningen, Netherlands, stressed the global applicability of the findings and methods. “Cities globally can learn from our findings based on the Kathmandu Valley. We provide a framework for assessing cooling potential that can be applied anywhere and used to plan cities to adapt to urban heat,” he said.

Dr Nawa Raj Pradhan from the US Army Engineer Research and Development Center warned that if no action is taken, increasing temperatures will put pressure on public health systems, increase energy demands for cooling and disproportionately hit vulnerable communities the hardest. The study estimates that implementing comprehensive cooling strategies could reduce urban cooling energy demands by 15-25 percent, potentially saving significant electricity costs while improving public health outcomes.

It has been more than two months since the inauguration of the World Expo in Osaka, Japan, but Nepal’s pavilion remains unopened. The expo, which began on April 13, will continue until October 13.

Construction was delayed due to negligence on the part of key line ministries, namely the Ministry of Industry, Commerce and Supplies, and the Ministry of Foreign Affairs. The delay stems from a protracted dispute between government agencies and the contractor. Despite selecting a private company for the project two years ago, poor coordination and unresolved issues have prevented its timely completion.

A government official described the situation as an embarrassment for Nepal, noting that 157 of the 158 participating countries have already opened their pavilions and are actively engaging with visitors and investors. “This has exposed Nepal’s governance failure on the global stage,” the official said, adding that preparations for the pavilion had started two years ago. Government officials put blame on the Ministry of Foreign Affairs for the entire delay. 

The government is blaming the contractor for the delays. Japanese and international media have begun reporting on Nepal’s lagging progress. Although the contractor, who had halted work, resumed construction just a week ago, it is still unclear when the pavilion will be completed.

This week, the Japanese Association for International Expositions confirmed that construction of Nepal’s pavilion has resumed. Japanese media report that work was suspended in January due to non-payment. Nepal has now assured the Japanese side that construction will be completed within a month.

Two months into the expo, ticket sales are rising steadily. Organizers say daily visitor numbers are increasing, with the reservation website often crashing around midnight due to high demand for slots at popular pavilions and events. Unfortunately, Nepal is missing out on this vital window for exposure and engagement. Since opening on April 13, the expo has sold approximately 3.75m tickets, which is nearly 30 percent of the 13.44m total sold since ticket sales began in November 2023 through June 6.