MP Tamang Warns That Increasing Bank Liquidity Could Entrap the Country in a ‘Liquidity Trap’

Kathmandu, 21 Asar – Member of Parliament from the Nepal Communist Party (NCP), Parshuram Tamang, has issued a warning that the growing liquidity in the banking system poses a risk of entrapping the country in a ‘liquidity trap’. Speaking at the Economic Committee meeting of the House of Representatives on Sunday, he emphasized the need for caution regarding this issue.

“Banks are accumulating a large amount of liquidity. I have used the term ‘liquidity trap’ to describe this situation. If this condition persists and the agricultural and industrial sectors fail to increase production or provide satisfactory economic contributions compared to the past decade,” he remarked. He underscored the importance of drawing the concerned authorities’ special attention to the unsatisfactory overall economic contribution of the agriculture and industrial sectors.

“Rather, this contribution appears to be declining. If we are unable to control the financial risks borne by the government through domestic public and bank overdrafts, this will undoubtedly limit public debt. If such a scenario arises, what guarantees do we have that we will not fall into a debt trap?” he questioned.