Nepal’s Central Bank Is Betting on Liquidity to Power Growth

Nepal Rastra Bank is signaling that monetary policy will stay closely aligned with the government’s next fiscal-year ambitions. Executive Director and Spokesperson Guru Prasad Paudel said the central bank will formulate policies to help meet the budget’s growth goals, with a particular focus on managing liquidity and containing inflation.

Speaking at a post-budget discussion in Kathmandu organized by the Nepal Economic Journalists Association, Paudel said the bank’s approach is designed to support a stronger economic expansion while keeping prices under control. The policy direction, he noted, is intended to help Nepal move toward 7 percent economic growth while keeping inflation within a 6 percent limit.

Why liquidity is the big lever

Liquidity matters because it affects how easily banks can lend and how cheaply businesses and households can borrow. When the banking system has enough cash, credit tends to flow more smoothly, which can support investment, spending, and growth.

That fits with NRB’s recent monetary stance. The central bank’s 2025/26 policy was described as expansionary, with lower interest rate corridor limits and a broader push to encourage lending and investment. NRB also said in its monetary policy document that adequate liquidity has helped bring down weighted average deposit and lending rates.

The growth target is ambitious

The challenge is that Nepal’s recent growth performance has been modest, not explosive. NRB’s own macroeconomic reports estimated economic growth at 4.61 percent for 2024/25, up from 3.67 percent in the previous year. In the February 2026 macroeconomic report, the central bank said high-growth outcomes above 6 percent would require favorable conditions across multiple fronts, including strong remittances, robust tourism, and improved capital spending.

That means the new budget and the central bank’s policy response will need to work together if the country is to move from moderate growth to the much more aggressive pace now being discussed.

Inflation is under control, for now

Paudel’s comment about keeping inflation within a 6 percent limit is consistent with recent data showing relatively stable price pressures. NRB reported annual average inflation at 4.06 percent in 2024/25, down from 5.44 percent the year before. In mid-January 2026, year-on-year consumer price inflation stood at 2.42 percent, suggesting inflation was still relatively subdued at the start of the year.

That gives the central bank room to support growth without immediately triggering a major inflation problem, although the balance could shift if credit expands too quickly or external pressures rise.

What this means for the economy

The message from Kathmandu is clear: Nepal’s central bank wants to be an active partner in the government’s economic program, not just a price-stability watchdog. By managing liquidity, steering interest rates, and keeping inflation in check, NRB is trying to create the conditions for stronger private-sector activity and larger capital investment.

But the success of that strategy will depend on more than monetary policy alone. NRB’s own reports point to the importance of capital spending, sectoral growth in agriculture, services, and infrastructure, and broader confidence in the investment climate. If those pieces do not move together, the growth target may remain more of a signal of intent than a guaranteed outcome.