Are you preparing for the NRB Officer? Master the latest Monetary Policy 2082/83 and the First Quarter Review with these 40 must-solve MCQs. Boost your score with detailed explanations on interest rate corridors, inflation targets, and new credit limits.
Showing posts with label Monetary policy. Show all posts
Showing posts with label Monetary policy. Show all posts
January 30, 2026
January 18, 2026
Theory and Practice of Fiscal Policy: From Stabilization to Structural Reform
Fiscal Policy is the use of government spending and taxation to influence the economy. It is one of the two primary tools for macroeconomic management—the other being monetary policy (managed by central banks).
In simple terms, fiscal policy is
how a government decides to earn money (taxes) and spend money (expenditure) to
achieve specific goals like economic growth, full employment, and price
stability.
In Nepal, Fiscal Policy is the primary economic instrument used by the Government of Nepal (GoN) to manage the national economy through the annual Federal Budget. It operates via three main channels: government expenditure (G), revenue collection through taxation (T), and public borrowing.
January 15, 2026
The End of Zero Percent Interest Rates: Impact on Nepal's Economy
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Remember when borrowing money felt... easy? For fifteen years, the world was at a party where the drinks were free, and the interest rates were zero. But look around. The lights just came on, the music stopped, and the bill just arrived.
We called it the era of 'Free Money.' But in 2026, we’re facing a cold new reality: Sticky Inflation. It’s not just a phase anymore—it’s the new baseline. Central banks have stopped waiting for things to 'go back to normal' because this is the new normal.
Meet the Neutral Rate. Think of it as the speed limit for the economy. For years, we were speeding at 0%. Now? The limit has been raised permanently. Money has a price again. And it’s not zero.
Why does this matter to you? Because that 'Free Money' party left a massive hangover. Your future mortgage? More expensive. Your business loan? Harder to get. Even your government is struggling to pay its own credit card bill. The weight of debt just got a lot heavier.
The era of easy money is buried. It’s time to stop waiting for rates to drop and start learning how to thrive in the high-rate era. Are you ready for the cleanup? Let’s talk about it in the comments. Follow Sara Pathshala for the survival guide.
January 6, 2026
Monetary Measures to Control Inflation
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates in an economy, to achieve goals such as controlling inflation. Inflation occurs when the general price level of goods and services rises over time, often due to increased demand or higher costs. To control inflation, central banks use various measures to reduce the money supply or make borrowing more expensive, which helps slow down economic activity and stabilize prices. Common monetary measures to control inflation include the bank rate, open market operations, and the reserve requirements ratio.
1. Bank Rate
Central banks can increase the benchmark bank rate, which is the rate at which commercial banks borrow from the central bank. By raising this rate:
• Borrowing becomes more expensive for banks, businesses, and consumers.
• Spending and investment decrease as loans and credit cost more.
• Reduced demand for goods and services helps slow the rise in prices, curbing inflation.
2. Open Market Operations:
Through open market operations, central banks sell government securities (like bonds) to banks and financial institutions Such as Re-purchase Agreement (Repo) and Reverse Repo.
• When banks buy these securities, money flows out of the banking system and into the central bank.
• This reduces the money supply and liquidity in the economy.
• With less money available for lending and spending, inflationary pressures decrease.
3. Increasing Reserve Requirements
Central banks can raise the reserve requirement, which is the minimum amount of money that commercial banks must hold as reserves against their deposits, Such as Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
• Higher reserve requirements mean banks have less money available to lend.
• This reduces the money supply circulating in the economy.
• Lower lending capacity slows down spending and helps control inflation.
4. Forward Guidance
Forward guidance involves the central bank communicating its future policy intentions to the public and markets:
• For example, signaling that interest rates will remain high or that tightening measures will continue.
• This influences expectations, encouraging businesses and consumers to adjust their spending and investment behavior.
• By shaping economic expectations, forward guidance can help reduce inflationary pressures.
May 11, 2025
How do Nepal’s monetary and fiscal policies work together to balance economic stability and growth?
Nepal’s monetary and fiscal policies work together to maintain economic stability and promote growth, especially in response to inflation and budget deficits.
Monetary Policy (Managed by Nepal Rastra Bank - NRB)
Inflation Control: NRB sets an inflation target (around 6.5%) and adjusts interest rates to stabilize prices
Liquidity Management: The central bank uses tools like open market operations and reserve requirements to regulate money supply.
Foreign Exchange Reserves: Nepal maintains reserves to cover imports for 7 months, ensuring economic stability.
Interest Rate Adjustments: NRB lowers rates to encourage borrowing and investment when growth slows.
Fiscal Policy (Managed by the Government)
Budget Deficit Management: Nepal faces challenges with expenditures exceeding revenues, leading to fiscal deficits.
Public Investment: The government prioritizes infrastructure and social programs to stimulate growth.
Taxation & Revenue Collection: Import restrictions were lifted to boost tax collection and reduce the deficit.
How They Work Together?
Inflation Control: NRB adjusts interest rates while the government manages spending to prevent excessive inflation.
Economic Growth: Lower interest rates encourage investment, while government spending supports infrastructure and job creation.
Budget Deficit Management: The government increases revenue through taxation, while NRB ensures liquidity to support economic activity.
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