IMF suggests tight liquidity to tame inflation

International Monetary Fund (IMF) has suggested a tight liquidity conditions to guard against risks of rising inflation and reduce inflation expectations.

Deputy Managing Director of the International Monetary Fund (IMF) Naoyuki Shinohara at the concluding ceremony of the South East Asian central banks' (SAECEN) Governors conference, here today, hailed Nepal's fiscal policies. "In terms of macroeconomic management, the fiscal policies have been prudent and revenues have been rising strongly, thanks to the authorities’ efforts at improving tax administration," he said, adding that Nepal’s peg to the Indian rupee has served as a valuable anchor for macroeconomic policies.

Likewise, he also hailed the country's progress in achieving the Millennium Development Goals (MDGs), particularly on poverty reduction and on health and sanitation. "I would also like to congratulate the authorities and the people of Nepal on their successful conduct of the Constituent Assembly (CA) elections," he said, adding that the IMF will continue to support the authorities through policy advice and technical assistance in their work to maintain economic stability and accelerate growth.

He also reiterated the IMF's support in the efforts to improve regulation and supervision to ensure financial stability, while expanding access to financial services. "The upcoming assessment under the Financial Sector Assessment Programme (FSAP) that the IMF and the World Bank will conduct jointly will contribute to mapping out further reform steps."

In my meetings, I commended the SAECEN authorities for their work in maintaining strong external accounts and a strong fiscal position, Shinohara said, adding that they discussed on how to accelerate and sustain growth, and ensure macroeconomic and financial stability. "In this context, I support the authorities’ aim to boost the economy’s potential, including by taking advantage of the resource inflows from remittances. Important contributions in this regard can be made by raising public capital spending and improving the business climate to create an attractive environment for private investment."

Shinohara, also held discussions with central bank governor Dr Yub Raj Khatiwada, on the sidelines of the SAECEN Governors meeting that started in the capital on Wednesday and concluded today.

The representatives of the Asian Development Bank, IMF, World Bank and various international experts took part in the seminar that focused on Financial Sector Development Strategy for Inclusive Growth. SAECEN has 19 central banks of South East Asian countries.