Kathmandu. Former governor Chiranjibi Nepal has said that the government’s policy to stop credit expansion has hampered the expected economic growth. During a discussion on the monetary policy held at the Finance Committee under the House of Representatives on Sunday, Minister Khatiwada said that the economic growth would not be possible until the credit was expanded.
He blamed that the NRB was compelled to take many wrong decisions under pressure from the government for not being autonomous. According to him, the country is now in economic problem as the government itself had exerted pressure to tighten the loan expansion at a time when credit was expanding in the past. Recalling that the country’s economic growth was achieved by 6 to 7 per cent while credit expansion was 18 to 20 per cent in the past, he said the credit expansion could not take place despite the target of 12 per cent.
He said that even if the credit is not expanded, the economic growth will be around 4 percent. He said that more than 40 percent of the country’s economy is informal sector.
According to him, the economy has not come to a complete standstill even though credit expansion is limited as there is a large amount of economic activity in the informal sector. Stating that sustainable economic growth was not possible without credit expansion, he stressed on credit expansion. He said that it is wrong to present the expansion of credit as the main reason for the economic problem.
He said that the unnecessarily stopping the loan expansion has directly affected production, investment and employment. He stressed that the central bank should be allowed to make policies autonomously. He said that the central bank has enough capacity to control loans going to any sector through directives if necessary.
