* Central bank on Wednesday issued Rs 6 billion worth repo but financial institutions absorbed only Rs 2.5 billion.
* Some financial institutions have applied to the central bank for refinancing.
* Central bank governor himself requested banks and financial institutions to help each other by providing inter bank lending as there seems to be trust deficit among themselves.
* Finance Ministry is positive on parking government's unspent money in Rastriya Banijya Bank instead of keeping it in central bank's vault.
Central bank and government both 'seem' to be serious due to current crisis, though central bank governor Dr Yubraj Khatiwada doesnot agree that financial system has any problem. "Some financial institutions are in problem," he has said, however, added that the central bank is also ready to help financial institutions to come out of the current problem in any way they want. But he still has doubt, "what if the financial institutions donot correct themselves and current crisis expands."
Apart from refinancing measures to financial institutions to create a more breathing space and twice a week repo to inject liquidity in the banking system, the central bank is realxing loan against share, and real estate and housing loan to help clean financial institutions' balance sheet by the end of the fiscal year that is less than a month now.
"However, repo and refinancing are the short-term measures," according to Nepali Congress leader and former finance minister Dr Ram Sharan Mahat.
"The central bank must bring a long term strategy," he said, adding that the short term measures will only help subside the problem but not solve the liquidity crunch as the informal sector has been balloning in recent years.
However, entrepreneurs think the current liquidity crunch is only the tip of iceberg and the whole economy is reeling under a crisis.
"The liquidity crunch is a part of whole economic mismanagement," according to Constituent Assembly (CA) member and entrepreneur Binod Chaudhary. "Since last three years, the country is passing through planned attack on investors and discouraging tax payers," he said, adding that the sector that can inject liquidity in the market is haunted by the government.
The indicators, according to him, are painting a gloomy picture of economy.
The secondary market index has plunged below 300 points to six year low, economic growth is at 3.42 per cent, balance of payment is at Rs 14.79 billion deficit, imports exceeds six times the exports. "By the first nine months of current fiscal year, merchandise exports recorded Rs 47.98 billion but merchandise exports stood at Rs 288.06 billion," according to the central bank data. "Inflation is at double digit since last three years."
The government has neither been able to mobilise domestic nor foreign aid resources to generate economic activities in the country, Chaudhary added.
"Had the government been able to mobilise foreign aid and expedite development spending, more liquidity would have been injected in the system," he said, lamenting the government's inability to mobilise foreign aid.
Nepal had received almost double to Rs 92,288.48 million foreign aid commitment -- including loan and grants from bilateral and multilateral agencies -- in the fiscal year 2009-10, However, political tug of war has slowed down the development activities making the government unable to mobilise the foreign aid commitment.
Similarly, from the domestic resources, the government has around Rs 13 billion in its coffer.
"Out of the total accumulated fund in the government coffer, some Rs 10 billion has to be pumped into the market to generate economic activities that can resurrect not only financial institutions but also lubricate economic cycle that has been jammed," according to another CA member and entrepreneur Rajendra Kumar Khetan.
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