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Nepal introduces new monetary instruments to control inflation
(Comtex Energy Via Thomson Dialog NewsEdge)KATHMANDU, Feb 23, 2006 (Xinhua via COMTEX) -- The central bank of Nepal on
Wednesday introduced new monetary instruments to control inflation
and bring about price stability in the country, state-run Radio
Nepal reported here Thursday.
"Being harried by the rising inflationary pressure and a price
rise in petroleum products, Nepal Rastra Bank (NRB) introduced the
new monetary instruments," the radio said.
NRB, as a policy response to the risk of inflation, has revised
bank rates by 25 basis points to 6.25 percent from an earlier
level of six percent which is expected to bring about stability in
the money market and prices, Bijay Nath Bhattarai, governor of NRB, said while releasing a mid-term review of monetary policy at NRB.
"The supply shock, especially of oil prices, has generated
pressure on the overall price level," the radio quoted Bhattarai
as saying.
"Despite the aggregate demand, monetary factors have little
role in it," Bhattarai said, adding, "However, the supply-induced
spurt in prices, has generated inflationary expectations."
According to Bhattarai, there is a possibility of drop in the
agriculture sector's and industrial sector's performance.
The bank rate was an indication for the banking sector which
guides interest rates of banks, Krishna Bahadur Manandhar, deputy
governor of NRB, said at the function.
"NRB already has over 12 billion Nepali rupees (171.42 million
U.S. dollars) in treasury bills which is enough to maintain market
stability, Manandhar revealed.
Food grain production is likely to decline marginally in
current Nepali fiscal year (July 16, 2005-July 15, 2005) owing to
unsatisfactory weather conditions both during summer and winter
seasons.
Manufacturing production grew at a low rate of 2.4 percent in
the first quarter of the current Nepali fiscal year compared to a
growth of 4 percent in the last Nepali fiscal year.
The hike in petroleum prices has increased inflationary
pressures and due to internal conflict, there is a greater
government expense and a larger budget deficit, Manandhar noted.
The central bank, in order to control inflation, will mop up
liquidity from the market through the issuance of treasury bills, he added.
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