KATHMANDU, MAY 22, 2012
The government is all set to request the World Bank (WB) to provide assistance under the Development Policy Loan (DPL) which the latter proposed recently.
The global lender had urged the government to take DPL worth $100 million for bringing reforms in the financial sector. A Finance Ministry official said the ministry will soon send a formal request to the WB.
WB provides DPL as quick-disbursing assistance to countries needing external financing to support structural reforms in the economic sector and the economy as a whole.
Initially, the bank had proposed that Nepal accept assistance to inject liquidity in financial institutions facing liquidity crunch. However, after improvements in the liquidity situation, the WB made the new proposal.
As the DPL proposal has been made by the WB itself, Nepal’s request to the lender will just be a ‘formality’, according to the official. The proposed loan of $100 million is the sum of the unspent aid amount that the bank had pledged to Nepal in the past.
As per the WB proposal, the Finance Ministry will have to establish a separate bank restructuring unit to look after the banking sector. “They are yet to clarify the logic behind establishing such a unit,” said a senior ministry official.
However, an official at the WB office in Nepal said the formation of the unit was suggested not a condition for the loan, but a suggestion to bring reforms in the Nepal Rastra Bank (NRB) based on past experiences. “NRB, being an implementing agency of its own re-engineering programme, faced many troubles in the decade-long financial sector reform programme. Hence, such a mechanism was sought,” said the WB official.
Other components of DPL are second round of restructuring of the stated-owned Rastriya Banijya Bank and Nepal Bank Limited. Introduction of the new Bank and Financial Institution Act (BAFIA), whose bill is under consideration at the parliament and introduction of the Micro-Finance Act with a provision of a separate regulatory body are other components of the pledged support. These were also the part of the previous financial reform programme which ended in December 2011.
“Regarding the restructuring of the two banks, we rejected some conditions for the loan which sought micro-management of the WB on certain measures,” said the ministry official. The WB has also incorporated the issue of conducting diagnostic reviews of banks and financial institutions under DPL, according to a senior NRB official.
The central bank has already started the diagnostics review of some banks and financial institutions.
Source: The Kathmandu Post
The government is all set to request the World Bank (WB) to provide assistance under the Development Policy Loan (DPL) which the latter proposed recently.
The global lender had urged the government to take DPL worth $100 million for bringing reforms in the financial sector. A Finance Ministry official said the ministry will soon send a formal request to the WB.
WB provides DPL as quick-disbursing assistance to countries needing external financing to support structural reforms in the economic sector and the economy as a whole.
Initially, the bank had proposed that Nepal accept assistance to inject liquidity in financial institutions facing liquidity crunch. However, after improvements in the liquidity situation, the WB made the new proposal.
As the DPL proposal has been made by the WB itself, Nepal’s request to the lender will just be a ‘formality’, according to the official. The proposed loan of $100 million is the sum of the unspent aid amount that the bank had pledged to Nepal in the past.
As per the WB proposal, the Finance Ministry will have to establish a separate bank restructuring unit to look after the banking sector. “They are yet to clarify the logic behind establishing such a unit,” said a senior ministry official.
However, an official at the WB office in Nepal said the formation of the unit was suggested not a condition for the loan, but a suggestion to bring reforms in the Nepal Rastra Bank (NRB) based on past experiences. “NRB, being an implementing agency of its own re-engineering programme, faced many troubles in the decade-long financial sector reform programme. Hence, such a mechanism was sought,” said the WB official.
Other components of DPL are second round of restructuring of the stated-owned Rastriya Banijya Bank and Nepal Bank Limited. Introduction of the new Bank and Financial Institution Act (BAFIA), whose bill is under consideration at the parliament and introduction of the Micro-Finance Act with a provision of a separate regulatory body are other components of the pledged support. These were also the part of the previous financial reform programme which ended in December 2011.
“Regarding the restructuring of the two banks, we rejected some conditions for the loan which sought micro-management of the WB on certain measures,” said the ministry official. The WB has also incorporated the issue of conducting diagnostic reviews of banks and financial institutions under DPL, according to a senior NRB official.
The central bank has already started the diagnostics review of some banks and financial institutions.
Source: The Kathmandu Post
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