The private sector that has been protesting against the increase in interest rates, suspended their protest after talks with newly appointed finance minister Bishnu Paudel today.
The private sector representatives from across the country held the discussion with finance minister, where central bank governor and secretaries at the Finance Ministry were also present.
"As we got positive response after the discussion, we have suspended our protest programmes," said one of the industrialists, after the talks.
During the discussion, the newly appointed finance minister Paudel asked for few days to address private sector's demands, though the industrialists, who were in discussion, claimed that they have suspended their protest with an agreement. "The government has vowed to address our demands," he claimed.
The private sector has been protesting against the government and Nepal Rastra Bank (NRB) for the past one month, asking to reduce interest rates and revise the 'Working Capital Loan Guidelines'.
Especially, the private sector representatives from Biratnagar, Birgunj, Bhairahawa and Nepalgunj have been asking for government intervention in reducing the interest rates as according to them the higher interest rates have been adversely impacting the investment. However, the government can neither reduce interest rates nor revise the 'Working Capital Loan Guidelines', as these both falls under the central bank, which is autonomous.
The central bank also cannot interfere much in the interest rate, as the market determines the interest rate, since last more than 4 decades. However, the private sector is forcing the government and central bank to fix interest rate in single digit, without presuming its adverse impact on themselves in future. "What will the private sector do, if government starts fixing price of each and every product," a banker asked, explaining that backtracking the open market operations will be a disaster for the private sector itself, legt alone the depositors' woes.
Since there is loanable fund crunch in the market, the banks and financial institutions (BFIs) are hiking the interest rates to attract the depositors. But hiking the interest rates has also not helped create new deposits, rather the deposits shifted from one institution to another only. The cheap fund during the Covid-19 has become expensive as the BFIs are drained out currently.
After the formation of a new government led by the Maoist Centre chair Pushpa Kamal Dahal 'Prachanda', the private sector met with both newly appointed Prime Minister Dahal and finance minister Poudel and sought government interference. In response, both of them committed to listen to the private sectors’ plea, though the situation is not in their hands. The government has not taken a full shape and most likely this government could not last long due to 'unnatural alliance' among the royalists ultra rightest and republican ultra leftist, apart from a couple of new political parties, which are yet to decide, where do they stand.
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