Kathmandu— Finance Minister Dr. Swarnim Wagle has called for amending the Nepal Rastra Bank Act to make the central bank more proactive and accountable, emphasizing the need for better coordination between fiscal and monetary policies in Nepal's economy. During a meeting of the Finance Committee under the House of Representatives on August 4, he highlighted the importance of effective collaboration between the Ministry of Finance and the Nepal Rastra Bank.

Proposed Amendments to Enhance Accountability

Dr. Wagle stressed that amending the act would make the central bank more accountable and proactive in its operations. He pointed out that having at least seven members on the board of directors is appropriate, but noted that the finance secretary's role will become even more crucial once provisions for direct instructions from the government are removed.

The minister also suggested reducing the number of deputy governors to two, arguing that there is already a separate structure for executive directors within the central bank. He emphasized the need for clear qualifications and definitions regarding board members' roles.

Challenges in Monetary Policy

Dr. Wagle highlighted the challenges Nepal faces with its monetary policy, particularly due to the fixed exchange rate maintained with India's currency. This arrangement limits the central bank’s ability to implement an independent monetary policy.

He also mentioned that inflation in Nepal is largely imported, which further restricts the effectiveness of monetary tools. Referring to the 'Impossible Trinity' concept from monetary economics, Dr. Wagle explained that maintaining a stable exchange rate while regulating capital flows means Nepal practices limited autonomy in its monetary policy.

Expert Representation on Board

The minister stressed the importance of having experts from various fields represented on the board of directors to ensure specialized knowledge and expertise. He suggested that people who have worked at executive levels in international financial institutions should be given opportunities to join the board.

Dr. Wagle also pointed out the need for a clear definition of 'executive level' roles to avoid confusion and ensure proper interpretation.

(With inputs from Rising Nepal)

Originally published on abcnews.com.np.