Kathmandu: In a significant shift in policy timing, the Nepal Rastra Bank (NRB) has implemented its monetary policy ahead of the new fiscal year for the first time since 2018.
The move marks a break from recent tradition, where monetary policies were typically introduced only after the fiscal year had begun.
The central bank unveiled the Monetary Policy for Fiscal Year 2025/26 on 11 July, several days before the start of the fiscal year on 16 July.
This early release is attributed to NRB Governor Prof. Dr. Bishwanath Paudel, who took office just two months ago. Since assuming his role, Governor Paudel has emphasized the need for effective coordination between fiscal and monetary policies.
Governor Paudel has argued that while fiscal policy (the national budget) is implemented from the first day of the fiscal year, monetary policy often lags by several weeks, creating an imbalance in macroeconomic planning.
To address this, he ensured the timely release of this year’s monetary policy. On the same day of its announcement, the central bank also introduced several regulatory adjustments and issued directives for immediate implementation.
NRB followed up the announcement by releasing a formal circular on 16 July, directing that changes made to the integrated directives take effect from 17 July. As a result, the monetary policy is now fully in force from the very first day of the fiscal year—an uncommon occurrence in Nepal’s recent financial history.
This year’s approach aligns closely with the Nepal Rastra Bank Act 2001, which mandates that the central bank formulate and publish a monetary policy each year.
According to Section 4(1)(a) of the Act, the NRB is responsible for designing and managing monetary and foreign exchange policies. Section 5(1)(b) further stipulates that the bank must formulate and implement necessary policies to maintain price stability.
Additionally, Section 94 of the Act requires the NRB to publish an annual Monetary Policy Report, which includes a review of the previous year’s policies and the rationale for the new policy. Based on this legal framework, experts argue that monetary policy should ideally be formulated and implemented before or by the start of the fiscal year—something that has now been realized under Governor Paudel’s leadership.
The last time the monetary policy was released in Asar was in Fiscal Year 2018/19, when then-Governor Dr. Chiranjibi Nepal announced the policy on 11 July. Since then, none of the monetary policies under former Governor Maha Prasad Adhikari—who served from 2019 to 2024—were issued before the fiscal year began. In fact, the monetary policy for FY 2021/22 was released as late as 13 August.
Delayed monetary policy announcements have often been attributed to weak coordination between the Ministry of Finance and the central bank. Governor Paudel’s early policy announcement this year is seen as an effort to restore synchronization and improve policy impact.
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