Opinion | Is more credit really the answer?
Summary
Nepal's central bank has lowered interest rates to stimulate lending, but private credit growth remains weak, revealing deeper economic structural issues rather than just a cyclical slowdown.
Key Points
- Nepal Rastra Bank has reduced interest rates to encourage bank lending, but credit uptake remains low.
- Private sector credit growth is in single digits, significantly lower than the decade-long average of about 20 percent.
- Nepal's economy is over-financialised, with lending heavily dependent on land and property speculation rather than productive investment.
- The current credit slowdown signals a structural correction, urging a shift from debt-led to productivity-led economic growth rather than pushing for more loans.
