SAARC E-Newsletter

Contents
Chair’s Message Section 2: Seminars

• SAARCFINANCE Seminar on Dynamics of
SAARC Secretary General’s Message
Inflation and its Control in South Asia
Governors’ Messages
SAARCFinance - 25 years at a Glance Section 3: Macro-Economic Trends

• Policy Measures in SAARC region
25 Years of SAARCFinance through lens
• Trends in Macroeconomic Surveillance
SF: Chair Governors indicators in SAARC countries
Governors Gallery Section 4: Articles

• Green Banking Initiatives by Bangladesh
Section 1: Meetings and Initiatives Bank
• 43rd SAARCFINANCE Meeting Group • The Currency Demand Paradox in India
• 35th SAARCFINANCE Coordinators' Meeting • Sovereign Debt and External Sector
• 36th SAARCFINANCE Coordinators' Meeting Vulnerabilities in South Asia - Sri Lanka
SAARCFINANCE Roadmap and Areas of
Section 5: Box Items
Cooperation
• SAARCFINANCE Database Working Group • The future of digital payments in Bangladesh
Meeting • Estimation of Growth-Maximizing Inflation
• Technical Assistance for Bhutan: Threshold Inflation
• Training Programmes • Sovereign Green Bonds
• Activities/Meetings/Initiatives Related to • Lightweight Payment and Settlement System
SAARC Payment Council Arranged by BB (LPSS): A Bunker Equivalent in Payment
Systems
• SAARCFINANCE Scholarship Scheme
• SAARCFINANCE Collaborative Studies
2 | SAARCFINANCE e-Newsletter - 2023

Silver Jubilee Edition
Chair’s Message
As SAARCFINANCE Chair, I feel privileged to launch
this Special Silver Jubilee Edition of the SAARCFINANCE
annual e–Newsletter. The Newsletter, in its cover story,
delineates from the prolific history of the forum and
refers to some memorable events and hallmark decisions
taken over the 25 years. It also embeds some historic
images from the Network’s Group meetings and other
notable events. The Newsletter offers rich tribute to
our predecessors and member central banks’ former
governors through the Governors’ gallery pages, and
presenting a rich collection of historic photographs economic woes. However, these challenges also provide
of Chair Governors. Besides these added features, the us a window of opportunities.
Newsletter displays traditional content with reports Certainly, SAARCFINANCE has the right potential
on the meetings and initiatives of the Network, country to become the cornerstone of economic and financial
reports on macroeconomic indicators and data sheets, integration given that we successfully leverage the
progress in areas under the Roadmap, and a few well- technological developments taking place around the
researched articles. financial landscape like digitalization, payment systems
To commemorate this cherished occasion - Silver integration and CBDCs. We also need to take concrete
Jubilee of the Forum, State Bank of Pakistan being steps for the promotion of cross-border flows, trade and
the current Chair also takes pleasure to present two investment that is mutually beneficial. In this regard, the
more publications: 25 Years History - Chronicles of SAARC central banks need to join hands and bring in
SAARCFINANCE and a pocket size Directory of the their respective Chambers of Commerce and Industry
Important Dates and Events over the 25 years. Both these to fore to enhance regional trade and investment flows.
documents would prove valuable future references as With this, I wish all the very best to SAARCFINANCE for
the former records achievements of the Network over achieving new heights in the years to come.
these years and the latter is a quick reference guide. Once again, I feel honored to be the Chair of the
Since its inception in 1998, SAARCFINANCE Network SAARCFINANCE for 2023, coinciding with the Silver
has anchored the South Asian Economies in areas Jubilee of the Network. I would like to express my
of macroeconomic policymaking, sharing of country gratitude to fellow Governors, and Secretary General of
experiences and mutual learning. After the roadmap in SAARC for their special messages for this special edition
2016, this remarkable journey towards shared prosperity of SAARCFINANCE e–Newsletter. Moreover, I would
got further traction culminating in worthwhile initiatives also like to take this opportunity to acknowledge and
like SF Database, Currency Swap Agreement, SF Payment appreciate the SBP team for successfully carrying out
Council and Collaborative studies on emerging policy regular activities of the SAARCFINANCE Secretariat as
and social issues faced by the region. well as producing three valuable publications. Likewise,
Notwithstanding these remarkable achievements, colleagues from other SAARCFINANCE central banks
the region is facing some formidable challenges like including Coordinators, Alternate Coordinators and
restrained growth, slower progress against poverty staff members also deserve our sincere gratitude and
elevation and increased geopolitical and economic appreciation for their invaluable contributions to the
fragmentation. The regional growth prospects have publications and relentless support extended to us in
been subdued amidst multiple shocks like Covid-19, carrying out the planned activities of the SAARCFINANCE
the commodity super-cycle, global monetary tightening, during SBP’s Chairpersonship.
and Russia-Ukraine conflict. In addition, we have another
common problem to deal with that is the ever increasing Jameel Ahmad
costs of climate change as losses emanating from Governor, State Bank of Pakistan
extreme weather episodes are further aggravating our SAARCFINANCE Chair
SAARCFINANCE e-Newsletter - 2023 | 3
SAARC Secretary General’s

Message
I am pleased to learn that SAARCFINANCE - the regional
network of Governors of Central Banks and Finance Secretaries
of the Member States of SAARC - is bringing out a Special Silver
Jubilee Edition of its annual e-newsletter to mark its silver jubilee
anniversary.
I felicitate the State Bank of Pakistan as the current Chair of
SAARCFINANCE for this laudable initiative.
The Tenth SAARC Summit (Colombo, 1998) had agreed, in
principle, to establish a "Network of Central Bank Governors and
Finance Secretaries of the SAARC Region (SAARCFINANCE)" with
a view to opening dialogues on macroeconomic policies of the
region and sharing mutual experiences and ideas. Accordingly,
SAARCFINANCE was established on 09 September 1998 as a
regional network of the SAARC Central Bank Governors and
Finance Secretaries.
On the silver jubilee anniversary of SAARCFINANCE, I warmly congratulate the distinguished Governors of
Central Banks and the Finance Secretaries on a long journey successfully traversed with many achievements
to its credit.
Esal Ruwan Weerakoon

Secretary General, SAARC

Governor’s Message
On behalf of Da Afghanistan Bank, I take this opportunity

to congratulate all the member countries for their prolonged
cooperation in the economic integration of the region.
SAARCFINANCE has had a profound impact on coordinating
regional policymaking and capacity building. It has always
been a reliable platform for the exchange of information and
ideas. I strongly believe in the economic potential of the region
and that SAARCFINANCE has a key role to play in the economic
prosperity of the region, particularly in the economic prosperity
of Afghanistan.
Hedayatullah Badri
Governor, Da Afghanistan Bank

I am delighted to learn that the SAARCFINANCE
Network has entered its 25th year. On this momentous
occasion, the Network is poised to release the
special Silver Jubilee Edition of the SAARCFINANCE
e-Newsletter for 2023. This exceptional edition of the
e-Newsletter encompasses recent macroeconomic
indicators, insights into the monetary policy stances
of central banks, highlights of pivotal central bank
policies, research articles, and informative pieces
on selected topics. Furthermore, it brings me great
pleasure to discover that the Network is preparing
to publish a historical book chronicling 25 years
of SAARCFINANCE and a pocket-sized directory
encompassing significant dates, events, and other meetings, and governors' symposiums. In 2021,
notable initiatives from SAARCFINACE's cooperative BB hosted the SAARCFINANCE database webinar
journey. styled "Covid-19 Pandemic in the SAARC Countries:
The establishment of the SAARCFINACE Policy Response and its Impact." Additionally, BB has
Network in 1998 marked a remarkable milestone in previously assumed the roles of Chair and Secretariat
regional development. The Network has played an of the Network in 2005 and 2017. Currently, BB holds
indispensable role in enabling member countries to the Chair of the SAARC Payment Council (SPC).
engage in discussions and address shared economic I seize this opportunity to extend my heartfelt
challenges, exchange best practices concerning congratulations to the current Chair, the State Bank
central bank policies and initiatives, and collaborate of Pakistan (SBP), for their dedication to compiling
to fortify financial systems. Such achievements would and publishing the special Silver Jubilee Edition
not have been conceivable without the unwavering of the SAARCFINANCE e-Newsletter for 2023.
commitment, dedicated leadership, and collective Furthermore, I express my profound appreciation to
efforts of all member countries. all member countries for their steadfast commitment
Bangladesh Bank (BB) has been actively involved and invaluable contributions. As we look towards
in various SAARCFINANCE initiatives since its the future, I am optimistic that the SAARCFINACE
inception. Over the years, a considerable number Network will continue to succeed in the years to
of BB officials have engaged in reciprocal visits come, further contributing to the progress and
to institutions in member countries, fostering prosperity of the region.
collaboration under the SAARCFINACE staff
exchange program. BB has also been instrumental Abdur Rouf Talukder
in organizing numerous SAARCFINANCE seminars, Governor, Bangladesh Bank

It gives me immense pleasure to congratulate the
current Chair, the State Bank of Pakistan (SBP) for
presenting the third SAARCFINANCE Annual Newsletter
2023. The Annual Newsletter offers a valuable glimpse
of the defining moments of the year and an important
milestone achieved under the Chair. It also provides an
insight of macroeconomic conditions in the member
countries, highlighting the policy strategies aimed at
addressing common macroeconomic and financial
issues and challenges in the region.
I am also delighted to learn that this year marks the
25th anniversary of SAARCFINACE network. Since its
inception in 1998, the SAARCFINANCE has played a
pivotal role in fostering cooperation and understanding
among the member countries, contributing to I strongly believe that the role of SAARCFINANCE
macroeconomic and financial stability, as well as will continue to expand further and remain pivotal
development of efficient payment system in the in strengthening the macroeconomic and financial
region. Through this network, Bhutan has significantly stability. This will serve as source of inspiration
benefitted from various initiatives particularly the for our multi-faceted engagement with many more
currency swap and technical assistance provided by innovative initiatives in the period ahead.
the Reserve Bank of India (RBI). Lastly, I extend my best wishes to the Central Bank of
The level of cooperation and support demonstrated Sri Lanka as they assume the next SAARCFINANCE Chair.
by the member countries during the Covid-19
pandemic is a testament of deep commitment and Dasho Penjore
unity within the SAARC Central Banks. Governor, Monetary Authority of Bhutan

I am happy to note that the SAARCFINANCE
network has completed 25 years since its
establishment in 1998. Over the years, the Reserve
Bank of India has been a key partner in taking
forward various initiatives under this network. These
initiatives include providing financial backstops to
countries under SAARC currency swap arrangement;
capacity building of member central banks through
various technical assistance, training, internship, and
knowledge exchange program; the SAARCFINANCE
scholarships; collaborative research studies, and
hosting of the SAARCFINANCE Database.
We at the Reserve Bank of India remain committed
to expanding our collaboration with our partner
SAARC central banks in the future.
Shaktikanta Das
Governor, Reserve Bank of India

Over the past 25 years, the SAARCFINANCE
network has played a pivotal role in fostering
cooperation among SAARC member nations. The
network remains committed to advancing the goals
outlined in the SAARCFINANCE roadmap even during
times of crisis. Looking ahead, as the region navigates
the post-Covid-19 landscape, it is imperative that
SAARCFINANCE continues to support efforts aimed
at building a resilient, sustainable, and inclusive
economy. In light of the current global recessionary
concerns and geopolitical uncertainties, I believe
future endeavours by SAARCFINANCE will be vital
in addressing emerging challenges to the SAARC
nations such as inflation, debt, income inequality, Frequency Indicators by Central Banks: Experience
and digitalization of the economy. Moreover, exploring and Future Plans" as well as the Database Working
avenues for bolstering intra-regional trade through Group Meeting on November 2, 2022.
Central Bank Digital Currencies (CBDCs) and local I wish to express my sincere gratitude to the
currency settlement mechanisms within the SAARC current Chair, State Bank of Pakistan (SBP) for their
region presents exciting possibilities. In this regard, outstanding work during their tenure. I also take
the Maldives Instant Payment System – FAVARA was this opportunity to congratulate and extend my best
launched by the MMA on August 26, 2023, which wishes to Governor Jameel Ahmad and his team at
offers convenient and efficient access to digital finance SBP on their efforts in compiling and publishing
across the country, enabling instant payment transfers the special edition of the SAARCFINANCE Annual
and allowing intra-regional use of the system is one e-Newsletter to mark 25 years of SAARCFINANCE.
of the goals of this project. Lastly, I extend my congratulations to other
I want to extend my heartfelt appreciation to SAARCFINANCE Governors and Coordinators,
all member nations for their contributions and both past and present, for their dedication to the
unwavering support to SAARCFINANCE's activities, SAARCFINANCE network.
including the successful completion of planned studies
and seminars. It was an honour for the MMA to host the Ali Hashim
SAARCFINANCE Database Seminar on "Utilizing High- Governor, Maldives Monetary Authority

It gives me immense pleasure to recall the
25 years of SAARCFINANCE. It has been a quite
successful journey in realizing the broad objectives
of its establishment. During these years of
meaningful existence, significant progress has been
made in the areas of cooperation on macroeconomic
policies, harmonization of legislations and practices,
facilitating payments, capacity building, and
collaborative studies. I take this opportunity to
express my sincere gratitude to the past leaders and
congratulate all of us for the milestones of notable
achievements realized from our joint efforts.
I hope this network will be able to nurture further
Our initiatives have been reflected in policy
coordination and cooperation on various issues such
discussions, joint research works, macroeconomic
as digitization, payment system integration and
databases, and regional collaborations such as the
financial inclusion. Nepal Rastra Bank is committed
SAARC Payment Council. The joint research studies,
to taking this initiative forward and providing full
meetings, and symposiums have been very effective
support to SAARCFINANCE for its future endeavors.
in fostering teamwork, strengthening cooperation,
Let's work together to deal with the common
discussing regional policy issues, and learning from
challenges, leverage the potentialities to achieve our
each other's experiences to tackle macroeconomic
aspirations, and build a better future for all of us.
challenges. The initiatives for capacity building in the
form of scholarships, staff exchange and technical Maha Prasad Adhikari
assistance have been our core strength. Governor, Nepal Rastra Bank

It gives me great pleasure to send this message
on the occasion of the Silver Jubilee of the
SAARCFINANCE Network. Since its inception in 1998,
the SAARCFINANCE forum has provided an excellent
platform for cooperation, initiatives while also enabling
several productive policy dialogues on macroeconomic
developments and practices within the region.
Over the course of the last two and a half decades, of these technical assistance and capacity building
the SAARC region has evolved dramatically and initiatives which we believe has not only benefitted
several strides have been made in cooperation us but has also been of value to other member central
among members. However, as highlighted in several banks. In this regard, I wish to extend my gratitude
policy circles, there is immense potential for further to the Reserve Bank of India for their generous
integration within the bloc which can be beneficial SAARCFINANCE Scholarship scheme extended to
for all member countries. This is not only in terms higher education aspirants. Such long-term capacity
of trade but also in terms of sharing of financial and building initiatives are imperative and timely and
nonfinancial resources, including technical know- enable member central banks to benefit from the
how in all areas of the economy spanning from expertise of one another. The Reserve Bank of India’s
agriculture to central banking. Going forward, this introduction of the SAARCFINANCE Swap arrangement
will be essential so that member countries can reap facility is also to be commended and appreciated.
the strategic benefits of the innate potential of our I would also like to take this opportunity to extend my
bloc in terms of its geographical positioning, skilled appreciation to the State Bank of Pakistan, the current
populations, vast natural resource base in addition to Chair, for overseeing the Silver Jubilee celebrations
other unique advantages that each of our individual of SAARCFINANCE, including the publication of the
nations possesses. In this context, SAARCFINANCE, special edition of the SAARCFINANCE newsletter. In
as an effective component of the SAARC institutional the past, the newsletter has proven to be a valuable
architecture, has considerable potential to pave the record of developments within the region and a means
way for regional cooperation in economic affairs. of showcasing some excellent researches and policy
Initiatives such as the SAARCFINANCE Governor’s papers. I am sure this Silver Jubilee edition will also
group meeting and the SAARCFINANCE Coordinators’ be an informative publication.
meeting have paved the way for formal discussions of Lastly, I wish to thank all the members for their
key developments and several high-level negotiations. active participation and involvement over the last
Other technical level sessions such as the Governors’ two and a half decades and sincerely hope that
symposium, annual database seminar have facilitated all members will continue to persevere towards
the presentation of several highly relevant and continued collaboration thereby ensuring the success
contemporary researches and analyses which has and prosperity of each of our nation and the region.
enabled national discussions along the same lines. Sri Nandalal Weerasinghe
Lanka has also had such opportunities to lead some Governor, the Central Bank of Sri Lanka

SAARCFINANCE
25 years at a Glance
The South Asian Association for Regional SAARCFINANCE's Collaborative Governance Model
Cooperation (SAARC) is a coalition of eight nations SAARCFINANCE operates through a well-defined
- Afghanistan, Bangladesh, Bhutan, India, Maldives, governance structure emphasizing collaboration
Nepal, Pakistan, and Sri Lanka. Their combined and rotational responsibilities among its members.
economic might represents 5.21% of the global Central to its operational framework is the
economy. The idea of SAARC was born out of various SAARCFINANCE Group, comprising the Governors
conferences since 1947, with a notable push during of central banks and the Secretaries of ministries
the late 1970s. of Finance from the SAARC nations, which drives
The geopolitical atmosphere during the USSR's strategic decisions and meets biannually. Day-to-
intervention in Afghanistan in 1979 catalyzed its day operations and planning are managed by the
formation. Leaders like President Ziaur Rahman of SAARCFINANCE Coordinators, nominated by each
Bangladesh and King Birendra of Nepal championed member central bank.
its cause, overcoming initial hesitations from nations To foster continuous coordination and inclusivity,
like India and Pakistan. By 1983, the foundation was there are provisions for alternate coordinators and
laid, and SAARC became official in 1985. focal points from the ministries of Finance. The
SAARCFINANCE’s Emergence and Importance secretariat's responsibilities rotate alphabetically
SAARCFINANCE, established in 1998, is a vital among SAARC member central banks on annual
segment connecting the Central Banks and Finance basis, ensuring each member can lead and shape
Ministries of SAARC nations. Its importance is evident the forum's agenda.
as it was declared a permanent entity within SAARC To streamline operations within member banks,
during the 11th SAARC summit in 2002. dedicated SAARCFINANCE cells have been established
at SAARC central banks, functioning primarily under
Purpose and Aims of SAARCFINANCE the Research Department of the respective banks.
SAARCFINANCE seeks to cultivate cooperation Moreover, nodal officers have also been nominated
among member nations in numerous areas like by each member bank to coordinate and facilitate
banking harmonization, efficient payment systems, the SAACFINANCE Database.
and global financial surveillance. It fosters sharing
experiences, overseeing international financial SAARCFINANCE Achievements Overview:
reforms, promoting research, and building Fostering Regional Collaboration and Insight
institutional networks. It is also agile enough to SAARCFINANCE, a keystone in SAARC's
consider ad-hoc directives from related SAARC economic ecosystem, has charted a remarkable
bodies.

journey of unyielding commitment to regional mechanism, reinforcing their relevance in a dynamic

economic collaboration. A primary highlight has economic landscape.
been its relentless drive towards capacity building A notable stride in human capital development
and information sharing through collaborative has been the SAARCFINANCE Scholarship Scheme,
research, staff trainings and technical cooperation initiated by the RBI in 2013. This visionary initiative
in areas of central banking and finance. Through sought to bolster the research prowess of officials
a plethora of initiatives, workshops, and from SAARC central banks and finance ministries to
symposiums, SAARCFINANCE has championed pursue graduation degree. Offering full-time Ph.D.
mutual understanding among member nations. scholarships in Economics, the scheme experienced
This spirit of cooperation has further manifested a transformative expansion in 2020, diversifying its
through collaborative studies, serving as conduits course offerings, affiliating with additional esteemed
for knowledge dissemination and capacity building. academic institutions, and enhancing its financial
Alongside this, the SAARCFINANCE network has provisions. Its subsequent successes, marked by
proactively organized joint research endeavors, candidates from diverse SAARC nations availing
punctuated by the continuous flow of publications admissions in reputed universities, epitomize
and policy documents. SAARCFINANCE's unwavering commitment to
Diverse topics, ranging from managing workers’ elevating economic research and policymaking
remittances to intricate subjects like ‘Off-site standards across the SAARC region.
Surveillance’, have been brought to the fore through Building upon these commendable achievements,
workshops and dialogues. Notably, exploring the SAARCFINANCE has fervently pursued its capacity-
viability of Central Bank Digital Currency (CBDC) and building and training goals. One of its cardinal
assessing the multifaceted implications of fintech objectives is fostering robust ties among the central
and financial inclusion stand out as testament to its banks and finance ministries across the SAARC
forward-thinking approach. expanse. The institution's proactive measures,
Another significant milestone has been the which promote staff visits and facilitate the
Currency Swap Arrangement, conceived to mitigate routine interchange of pivotal information, amplify
short-term liquidity adversities and align with this commitment. Beyond just diplomacy and
global economic structures. The Reserve Bank of networking, SAARCFINANCE’s ambition to bolster
India played a pivotal role in 2012, heralding this the proficiencies of officials from member nations
initiative with a substantial commitment for fellow is crystal clear.
SAARC countries. This arrangement, envisioned as With staff exchange programs at its helm, the
a bedrock for intra-regional trade enhancement, institution aims to foster an environment where
also aims at stabilizing exchange rates and ensuring officials can assimilate and adapt best practices from
uninterrupted access to foreign currency reserves in peers across borders. These programs, with their
times of liquidity crisis. breadth covering subjects from the subtleties of risk-
Simultaneously, SAARCFINANCE introduced based supervision to understanding the mechanics of
Stop-Gap Arrangements, devised as interim fiscal forward marketing for agricultural products, stand as
countermeasures. These versatile solutions, which a testament to the institution’s dedication to holistic
can span monetary aid, loans, or grants, embody development.
SAARCFINANCE's agility in addressing emergent Another significant initiative, the SAARCFINANCE
financial challenges. Their architecture underscores Financial Inclusion (FI) platform, was launched in
swiftness, collaboration, and a periodic review 2020, during the 40th SAARCFINANCE Governors’

Group Meeting. This platform serves as a treasure of environmental changes demand an integrated
trove of initiatives by SAARC central banks that approach, harnessing the green financing
endeavor to enhance financial inclusion and literacy. opportunities while mitigating the looming risks.
It functions as a nexus for strategy papers, financial As the digital age dawns, SAARCFINANCE also
literacy materials, policy documents, and research perceives the rising significance of Central Bank
studies, all intended to enlighten officers of SAARC's Digital Currency (CBDC). In sync with the global tide,
central banks. This digital repository is further the consortium acknowledges the need to lead in
enriched by valuable contributions like master formulating a regional strategy, harmonizing digital
directions on lending to priority sectors and SMEs, education with CBDC developments for the collective
speeches from notable figures on financial inclusion, betterment of the SAARC region.
and strategic documents on financial literacy.
Beyond Today: Envisioning SAARCFINANCE's
Future Endeavors
As SAARCFINANCE commemorates its 25th
anniversary, its aspiration for a unified financial
future, transcending borders is palpable. The
consortium recognizes the potential in pooling the
unique strengths of its diverse members. Future
collaborations might pivot to burgeoning domains
such as financial technology, green financing, and
crisis management strategies.
Additionally, a reimagined academic landscape
could witness institutions from SAARC nations
partnering to offer specialized courses, thus refining
human resources in the financial sector. There are
also discussions about expanding SAARCFINANCE’s
embrace by including more countries. However, any
such expansion would necessitate an immaculate
framework to harmonize new entrants.
An exciting prospect that looms large is the
potential to catalyze intra-regional trade through
an integrated banking system. Envisioning a SAARC
member establishing a banking presence in every
other member nation isn't just a financial proposition
but a strategic need. Such interconnections would
ease business operations, reduce trade barriers,
and instigate heightened economic interdependence
among the SAARC nations.
Moreover, in the contemporary setting, with
the urgency of climate change casting a shadow,
SAARCFINANCE recognizes its role. The challenges

25 years of SAARCFINANCE
Through Lens






Governors and Deputy Governors of the 30th SAARCFINANCE Group Meeting held in Dhaka on 12 June, 2015

The Officials of the SAARCFINANCE Seminar on “Management of External Sector Openness: South Asian Country
Experiences” held in Dhaka on 29 April 2014
Delegates of 30th SAARCFINANCE Group Meeting held in Dhaka on 12 June, 2015.

The Delegates and Organizers of the SAARCFINANCE Seminar on ‘Impact of Mobile Financial Services in the SAARC Region’
held in Dhaka on 19 December, 2016.
The Coordinators, Alternate Coordinators and Organizer of the 25th SAARCFINANCE Coordinators Meeting held at Pan
Pacific Sonargaon, Dhaka on 09 April, 2017.

The Coordinators, Alternate Coordinators and Organizer of the 26th SAARCFINANCE Coordinators Meeting held in Cox’s
Bazar, Bangladesh on 26 August, 2017.
Officials of Bangladesh Bank in the SAARCFINANCE Database Webinar on: “Covid-19 Pandemic in the SAARC Countries:
Policy Responses and its Impact” along with the Database Working Group Meeting held in Dhaka on 22 June, 2021.

SAARCFINANCE
Chair Governors
A.S. Jayawardena Dr. Tilak Rawal

Central Bank of Sri Lanka (Oct 98 - Jan 02) Nepal Rastra Bank (Jan 02 - Apr 04)
Dr. Ishrat Husain Dr. Salehuddin Ahmed

State Bank of Pakistan (Apr 04 - Sep 06) Bangladesh Bank (Sep 06 - May 07)
Dr. Y.V. Reddy Dr. D. Subbarao

Reserve Bank of India (Oct 07 - Apr 08) Reserve Bank of India(Oct 08 - Apr 09)

SAARCFINANCE
Chair Governors
Mr. Daw Tenzin

Mr. Ajith Nivard Cabbral Royal Monetary Authority of Bhutan
Central Bank of Sri Lanka (Apr 09 - Apr 10) (Oct 10 - Sep 11)
Dr. Fazeel Najeeb Dr. Yuba Raj Khatiwada

Maldives Monetary Authority Nepal Rastra Bank (Oct 13 - Oct 14)
(May 12 - Oct 13)
Mr. Ashraf Mahmood Wathra Mr. Arjuna Mahendran

State Bank of Pakistan Central Bank of Sri Lanka (Oct 15 - May 16)
(Oct 14 - Oct 15)
SAARCFINANCE
Chair Governors
Dr. Indrajit Coomaraswamy Mr. Fazle Kabir

Central Bank of Sri Lanka (May 16 - Oct 16) Bangladesh Bank (Oct 16 - Oct 17)
Mr. Khalilullah Sediq Mr. Dasho Penjore

Da Afghanistan Bank (Oct 17 - Oct 18) Royal Monetary Authority of Bhutan (Oct 18 - Oct 19)
Mr. Shaktikanta Das Mr. Ali Hashim

Reserve Bank of India (Oct 19 - Mar 21) Maldives Monetary Authority (Mar 21 - Nov 21)

SAARCFINANCE
Chair Governors
Mr. Maha Prasad Adhikari

Nepal Rastra Bank (Nov 21- Oct 22)
Mr. Jameel Ahmad

State Bank of Pakistan (Oct 22 - Oct 23)

Governors' Gallery

Section 1
Meetings and Initiatives

43rd SAARCFINANCE
Group Meeting and
Symposium
As Chair for the year 2022-2023, State Bank of consistent definitions across SAARC countries and
Pakistan (SBP) organized the 43rd SAARCFINANCE high frequency data on important indicators would
Group Meeting (SFGM) and Symposium on May 2-3, enhance the capacity of regional researchers and
2023 in a hybrid mode. The meeting was held F2F support evidence based policy formulation. The Chair
in Islamabad (Pakistan) while allowing for virtual highlighted the importance of regional cooperation
participation as well. The meeting was chaired by on financial inclusion. He also emphasized that
Jameel Ahmad, Governor, SBP and was attended the SYNC Portal that is fully functional for sharing
in person by the Governors from SAARC central resources and updates on financial inclusion
banks — Mr. Maha Prasad Adhikari, Nepal Rastra initiatives by member countries, should be leveraged
Bank (NRB) and P. Nandalal Weerasinghe, Central in this regard.
Bank of Sri Lanka (CBSL), whereas Mr. Ali Hashim, The Chair noted the importance of collaborative
Maldives Monetary Authority (MMA) participated research studies in enhancing understanding of
virtually. The delegates from Afghanistan, Bhutan, economic issues in an intra-regional setting. In
Maldives, Nepal, and Sri Lanka attended the meeting the meeting, two research studies were discussed.
in-person whereas delegates from Bangladesh joined SBP presented findings of the study on “The Use of
the meeting virtually. Unconventional Monetary Policy Instruments by
At the start of the meeting, Governor SBP South Asian Central Banks”, while NRB presented
highlighted the importance of the regional networking findings of the study on “Central Bank Digital Currency
and the pivotal role played by SAARCFINANCE in (CBDC) in the SAARC region”, respectively. Further,
providing opportunities for shared growth and as proposed by the Chair, the forum supported the
prosperity in the region. The Chair also applauded idea to follow the new rule for hosting the Database
the forum’s role in providing platform to learn from Working Group meeting and seminar. Accordingly,
each other’s experiences on relevant macroeconomic the Chair announced that State Bank of Pakistan–
policies and the need to further fortify cooperation being the current Chair – would follow the new
among SAARC economies on the face of challenging mechanism and hold the Database Working Group
external environment being faced by the region. meeting and Seminar next year i.e. 2024.
In the meeting, under SAARCFINANCE Roadmap, Towards the end of the meeting, the Chair
the Chair acknowledged the importance of setting underlined that the proposal of preparing a 25-year
the direction of regional cooperation across the SAARCFINANCE chronological history was floated by
member countries. He hoped that the database with RBI in the 41st Group Meeting. He also informed the

participants that SBP being the current Chair, would for increased openness and transparency for central
consolidate the SAARCFINANCE history and present banks to willingly collaborate with the researchers
the same in the next Group meeting scheduled in through data and information sharing to improve
October 2023. The Chair sought cooperation from all the design of financial products and facilitate the
members in this effort; especially regarding sharing financial intermediation process.
of most notable contributions and achievements
related to SAARCFINANCE in their respective tenures
with SBP.
The State Bank of Pakistan also invited the
participating guests from SAARC countries to attend
Zahid Husain Memorial Lecture (ZHML) that is
SBP’s flagship lecture to pay tribute to Zahid Husain
– who was the first Governor of the State Bank of
Pakistan. Over the years, eminent economists, Nobel
laureates, finance experts and renowned central
bankers from all over the world have been invited
by the SBP to deliver ZHML in Pakistan. The 24th
ZHML was delivered by Professor Asim Ijaz Khwaja
on “Democratizing Lending: The Challenges and
Opportunities for Financial Inclusion in Emerging
Economies”. Dr. Khwaja is a well known economist,
Director of the Center for International Development
(CID), the Sumitomo-Foundation for Advanced
Studies on International Development Professor
of International Finance and Development at the
Harvard Kennedy School, and the co-founder of the
Center for Economic Research in Pakistan (CERP).
In his lecture, Dr. Khwaja talked about several
issues pertaining to financial intermediation
including its design and implications. While
mentioning the current macroeconomic challenges
faced by both developed and developing economies
alike, he underscored that countries/ individuals
must use their debt more productively. Dr. Khwaja
emphasized that the current challenges also provide
a window of opportunities for the policymakers
to rethink and improve the design of financial
instruments and policies to bring efficiency in the
financial system. In addition, he highlighted the need

SAARCFINANCE
Governors’ Symposium
The SAARCFINANCE Governors’ Symposium on
“Climate Change and Green Financing Initiatives &
Outlook in South Asia” was inaugurated by the Chair
on May 03, 2023. He emphasized the importance of
effective, creative and prudent use of technology by
central bankers, especially in the areas of Climate
Change and Green Financing. The keynote address
was delivered by Mr. Virender Kumar Duggal –
Principal Climate Change Specialist in the Sustainable
Development and Climate Change Department at
the Asian Development Bank (ADB) and Mr. Farhan
Fasihuddin –Corporation Principal Investment Officer
at the International Finance Corporation (IFC).
After the keynote address, a panel discussion
featuring renowned experts on climate agenda &
green financing was organized to discuss “The Role of
Financial Sector in Advancing Climate Change Agenda
and Green Financing in SAARC Countries”. During the
detailed deliberations, a consensus emerged that
SAARC region is one of the most affected areas due to
climate change, and the central banks are required to
safeguard the financial sector against climate change
and environmental risks by undertaking various
green/sustainable initiatives. A proposal was put
forth by the forum for setting up a Working Group
in the area of “Sustainable Finance”. This proposal
was also supported by the SAARC central bank
governors attending the symposium recommending
that the Working Group should broadly serve as a
collaborative platform to develop approaches and
recommend actions to safeguard the financial sector
against climate change and environmental challenges
in the region.

Excursion Trip, City Tour, and

Cultural Program
In addition to SAARCFINANCE events, the
State Bank of Pakistan also arranged an excursion
trip to hill areas nearby Islamabad, a special city
tour of shopping markets in Islamabad and a
dedicated culture show for SF delegates and their
families at Pakistan National Council of the Arts
(PNCA), Islamabad. Excursion trip and city tour
were absolutely enjoyed by the SF delegates and
their families. The culture show – portrayed the
richness and diversity of various geographic and
ethnic communities in Pakistan in particular and in
South Asia in general. The SF delegates enjoyed and
appreciated the superb performances by renowned
folk artists who represented the beautiful shades of
Pakistani culture.
35th SAARCFINANCE Coordinators'

Meeting
The 35th SF Coordinators’ Meeting was held in Chair briefed the members about the initiatives
a virtual mode on February 16, 2023 by the State carried out by them since the last meeting including
bank of Pakistan to review the progress made on update on Macroeconomic Surveillance Indicators
the action points of the 42nd SFGM and to discuss (MSI) data, annual e–Newsletter 2023, Collaborative
the agenda of the 43rd SFGM to be held hybrid Research Studies, Capacity Building, SAARCFINANCE
mode on May 02-03, 2023 at Islamabad (Pakistan). Symposiums and Seminars, Agenda setting for 43rd
Dr. Muhammad Farooq Arby, SF Coordinator and SAARCFINANCE Group Meeting.
Director Research SBP Chaired the meeting. The

36th SAARCFINANCE
Coordinators' Meeting
The 36th SF Coordinators’ Meeting was held in a Bilateral Currency Swap Agreement on 17th July, 2023
virtual mode on July 25, 2023 by the State Bank of at La Meridien, Paro, Bhutan under the SAARCFINACE
Pakistan to review the progress made on the action Currency Swap Framework. The ceremony was graced
points of the 43rd SFGM and to discuss the agenda of by the Hon’ble Governor Dasho Penjore of the RMA,
the 44th SFGM to be held alongside the Fund- Bank and was signed by Deputy Governor, Mr. Phajo Dorjee
annual meetings at Morocco in October 2023. Dr. of the RMA and Deputy Governor Dr. Michael D. Patra
Muhammad Farooq Arby, SF Coordinator and Director of the RBI.
Research SBP Chaired the meeting. The Chair briefed The Reserve Bank of India, with the concurrence of
the members about the developments and initiatives the Government of India, introduced the ‘Framework
carried out since the last meeting including, 25 Years on Currency Swap Arrangement for SAARC Countries’
History of SF, publication of annual e–Newsletter 2023, in 2012 to provide a backstop line of funding for
SF directory of important dates and evets over the 25 short-term foreign exchange liquidity requirements
years, and Agenda setting for 44th SAARCFINANCE to SAARC central banks.
Group Meeting. Since the 44th SFGM also coincides Under the terms and conditions of the Framework
with the silver jubilee year of the SF Network, the for 2019-22, RBI will continue to offer bilateral swap
members ensured SBP of their maximum support and arrangement within the overall corpus of US$ two
sharing of requisite information regarding SF History, billion. The drawals can be made in US Dollar, Euro
e–Newsletter 2023 and SF Directory. or Indian Rupee. The swap facility has helped the
countries to overcome liquidity and external sector
Bilateral Signing of Currency Swap pressures, especially during the pandemic.
The Royal Monetary Authority of Bhutan (RMA)
hosted the Reserve Bank of India (RBI) for signing
Left: Mr Vineet Kumar Srivastava, Mrs Smita Sharma, Dr Mohau Roy, Dr. Michael D. Patra, Dasho Penjore, Mr Phajo Dorjee

SAARCFINANCE
Roadmap and Areas
of Cooperation
SAARCFINANCE Database Working Group new user-friendly interface, updated templates
Meeting with newly added variables, interactive dashboard
SAARCFINANCE Database Working Group reflecting latest movements in the given variables,
Meeting was hosted by Maldives Monetary Authority new features to view/download customized data and
on November 2, 2022 while the Reserve Bank of upload metadata and advanced release calendar, link
India led the agenda and issues for discussion. The of data reporting portal on database, etc. It was also
participants discussed various items including highlighted that, with this update, the automated data
data gaps, technical issues in accessing database, reporting portal would now also include metadata
addition of new variables, revamp of database. The and advance release calendar.
RBI team presented the revamped database with
Saarcfinance database working group

Technical Assistance
Strengthening the RBI’s efforts for capacity policy framework and human resource policies. RBI
building in the SAARC region, a first of its kind also provided information assistance to MMA on
internship opportunity with RBI was provided to instant payment systems and to Nepal Rastra Bank
ten officers from the MMA on data analytics for six (NRB) on working of accounts division of currency
weeks, as part of their Data Science Professional management department. The RBI organized a half
Programme (DSPP) introduced by the MMA. The day workshop for RMAB on central bank digital
RBI provided technical assistance to Royal Monetary currency (CBDC), oversight of NPCI and government
Authority of Bhutan (RMAB) for developing monetary securities.
Meeting between RBI and MMA for SAARC Swap SF Dialogue on Monetary Policy between RBI and BB, JULY 2023
Training Programmes RBI started inviting participation in 2021 from

member central banks to the training programmes
As the world embraced normalcy with the eas- conducted by the RBI Academy- a training institu-
ing of restrictions for international travels post tion set up by the RBI for imparting training on top-
pandemic, the RBI, through its training establish- ics of relevance to central bankers, regulators and
ments, offered a variety of training programmes supervisors around the globe. The RBI Academy
for SAARCFINANCE participants. Fifty officers saw good response from SAARCFINANCE central
from the Nepal Rastra Bank (NRB) participated banks with a total of 257 Officers (179 from BB, 41
in the “Customised Programme on Cash manage- from RMAB, 26 from NRB, 9 from CBSL and 1 from
ment, Payment System and Branch operations for MMA) participating in virtual training programmes
Assistant Level Employees of Nepal Rashtra Bank”. conducted on various topics.

SAARC Payment Council

As per the decision of the 20th meeting of the BB has also taken the initiative to update the
SAARC Payment Council (SPC), Bangladesh Bank (BB) website of SAARC Payment Initiative with correct
has taken the responsibility of being the secretariat of and updated information. A separate team is formed
SAARC Payment Initiative from April 2021. Afterwards, within the Payment Systems Department complete
BB conducted several meetings of SPC on different the task.
issues. BB arranged the first working group meeting
of SPC virtually on the harmonized payment system SAARCFINANCE Scholarship Scheme
on December 14, 2021. Further, a separate working The SAARCFINANCE scholarship scheme for higher
group meeting was organized virtually by BB on the studies in Economics was introduced by the RBI in
risk mitigation matrix for the payment systems of 2013 which later expanded its scope in terms of
SAARC countries on March 14, 2022. Both meetings courses, institutions, no of scholarships etc to cater
were chaired by Mr. Md. Mezbaul Haque, the General to the demands from the members.
Manager (currently Executive Director), Payment The scholarship was awarded to three officers
Systems Department, Bangladesh Bank, and Chair of from the Bangladesh Bank and one officer from the
the Working Group. Apart from these regular working Ministry of Finance, Sri Lanka for the academic year
group meetings of SPC, BB also arranged a few one to 2023-24, of which two candidates from the BB has
one meetings with other member countries based on secured admission in recognized universities in India
their ad-hoc requirements. for higher studies. Moreover, two candidates, from
The challenges and possible ways for harmonized Bangladesh Bank and Nepal Rastra Bank respectively,
payment system were discussed in the first working selected under the scheme for the academic year
group meeting. The prevailing frictions in cross-border 2022-23, secured admission in prominent academic
payment had been discussed, and a benchmarking institutions in India during the current academic year.
report for the existing payment platforms of the
SAARC countries had been prepared. It had also been SAARCFINANCE Collaborative Studies
decided to arrange a workshop in this regard, but due 1. SAARCFINANCE Collaborative Study on Fintech
to the pandemic situation, the workshop could not and Financial Inclusion
be held. The SAARCFINANCE Collaborative Study on Fintech
During the second meeting regarding the risk and Financial Inclusion, led by the RBI, was completed in
mitigation matrix, a working group was constituted 2021. The study observed that in recent years, all SAARC
to examine each country’s payment initiatives countries have provided increased focus on FinTech
comprehensively. It had been decided that each driven financial inclusion and some of the countries
member country will choose which platform they have achieved commendable progress in it. The Fintech
prefer to use to perform the risk measurement and in SAARC region is largely dominated by payment and
mitigation exercise. Besides, BB as the secretariat of credit. SAARC central banks have played a key role
SPC will share their risk matrix questionnaire, and in fostering financial inclusion through FinTechs by
based on the responses from all member countries, a developing new products and infrastructure, promoting
final risk matrix questionnaire will be prepared. It is innovation, focussing on customer protection and
worth mentioning that both the benchmarking report enhanced regulatory and supervisory oversight.
and the risk matrix are at final stage. Responses from However, a lot of heterogeneity is observed among
most of the member countries have been received, SAARC countries in FinTech’s coverage, penetration and
and the final document will be published soon efficiency. The study took a detailed stock of all these
after receiving responses from rest of the member developments in FinTech driven financial inclusion area
countries. in SAARC region and provided policy suggestions.

Section 2
SAARCFINANCE
Seminars

SAARCFINANCE Seminars
Reserve Bank of India (RBI) hosted a seminar on development through increased trade and investment
‘Dynamics of Inflation and its Control in South Asia’, and through deeper regional economic integration
on August 24, 2022, at New Delhi. Dr. Michael D. Patra, holds considerable promise in South Asia.
Deputy Governor, Reserve Bank of India delivered a Mr. Yan Carriere-Swallow, International Monetary
keynote address stating that the theme of the seminar Fund gave a presentation on ‘Inflation Dynamics in the
assumes significance in the present milieu, with Region’ and Mr. James Yetman, Bank for International
inflation broadening across national jurisdictions, Settlements presented on ‘What Determines Inflation
and repeated shocks stemming from the outbreak of in Emerging Market Economies?
the pandemic and global spill overs. Dr. Patra further Country papers on the Seminar theme were
underlined that even though the present is clouded presented by delegates from the Bangladesh Bank;
with uncertainties, the SAARC holds great potential Royal Monetary Authority of Bhutan; Maldives
for economic expansion with abundant natural Monetary Authority; Nepal Rastra Bank; State Bank
resources, human capital and market access. He of Pakistan; and Central Bank of Sri Lanka, besides
stressed that the promotion of economic and social papers by delegates from the RBI.
SAARCFINANCE seminar on “Dynamics of inflation and its control in South Asia”- August 24, 2022
City Trip of the seminar participants

Section 3
Macro-Economic
Trends

Policy Measures in
SAARC Region
Bangladesh erence lending rate, known as the 'SMART' (six-month
moving average rate of Treasury bill), with a margin
Bangladesh Bank usually announces monetary policy
on a half yearly basis with the objectives of achieving applied for banks and non-bank financial institutions
price stability and supporting output and employment (NBFIs).
growth. BB announced two issues of its Monetary Policy • BB has taken steps towards aligning the ex-
Statement (MPS) during H2FY23 and H1FY24. change rates with the market forces and move towards
BB’s monetary policy for the H2FY23 pursued a cau- a unified exchange rate, effective from 3 September 2023.
tiously accommodative policy stance to contain inflation- • BB has already started to calculate and publish
ary and exchange rate pressures, while supporting out- gross international reserves (GIR) in line with the sixth
put and employment growth by ensuring flow of funds edition of the IMF's Balance of Payments and Interna-
to productive purposes. BB raised its policy rates namely tional Investment Position Manual (BPM6).
repo and reverse repo by 25 basis points to 6.00 percent
and 4.25 percent respectively in FY23. In addition, the Highlights of Major Policies of Bangladesh
lending rate cap for consumers’ credit was relaxed up to Bank
3.00 percentage points, along with the complete removal BB adopted a new monetary policy framework
of the deposit floor rate. that shifts from a monetary aggregate targeting to an in-
BB’s current MPS for the H1FY24 has been adopted terest rate targeting. The target policy interest has been
a contractionary monetary policy stance for combating set at 6.50 percent, which accompanied by a ±200 basis
inflationary pressure accompanied by some new policy point symmetric corridor consisting of a standing lending
initiatives, which are highlighted below: facility (SLF) rate at 8.50 percent and a standing deposit
• BB announced a paradigm shift from a monetary facility (SDF) rate at 4.50 percent.
aggregate based targeting regime to an interest rate tar- √ BB raised policy rates by 50 basis points to 6.50
geting regime. Accordingly, an interest rate corridor sys- percent and standing deposit facility (SDF) rate by 25
tem has initially been introduced for steering call money basis points to 4.5 percent effective from 1 July 2023.
rate. The policy interest has been set at 6.50 percent, √ BB has introduced a unified exchange rate from
which accompanied by a ±200 basis point symmetric September 3, 2023 to align the exchange rate with the
corridor consisting of a standing lending facility (SLF) market forces.
as special repo and a standing deposit facility (SDF) as √ BB has launched the Interoperable Digital Trans-
reverse repo. actions Platform (IDTP) called ‘Binimoy’ as on 13 Novem-
• Following the contractionary mode, BB adjusted ber 2022. This platform serves as a transaction bridge
policy rates upward by 50 basis points to 6.50 percent, between various payment system partners, providing
while the SDF rate adjusted upward by 25 basis points customers access to multiple digital payment services
to 4.5 percent effective from 1 July 2023. through a single application processing interface.
• BB intended to introduce a market-driven refer- • Banks are allowed to show their highest capital
ence lending rate for bank loans, replacing the previously market exposure limit based on the stock-like instru-
imposed lending rate cap. BB declared to introduce a ref- ments' purchasing price instead of their market value.

• Mobile Financial Service Providers (MFSPs) are CRR upward from 7 percent to 8 percent to moderate
allowed to repatriate wage earners’ remittance in asso- aggregate demand in the economy through management
ciation with internationally recognized online payment of liquidity in the banking sector and credit growth.
gateway service providers. Additionally, the RMA reviewed regulations related to
• BB issued a guideline on cloud computing for debt-to-equity ratio, loan to value and loan to income,
the financial sector to facilitate data-sharing in a secure minimum ceiling on leverage ratio and capital provision-
manner, avoid risks and build a strong information tech- ing. A moratorium was imposed on housing and hotel
nology infrastructure in financial sector. construction, complimenting the vehicle moratorium
• BB has given permission to banks for contactless imposed by the Government, and given that, this sector
payment by using near field communication (NFC) tech- has high loan concentration and Non-Performance Loans
nology for card-based transaction to encourage people (NPL) risks in the financial sector.
for using electronic payment methods.
Highlights of Central Bank Policies
Bhutan • The Monetary Measures Phase IV has been an-
nounced to further support targeted sector in terms of
The Royal Monetary Authority (RMA) of Bhutan has
extension of loan term in vulnerable sector, treatment of
intensified its efforts to enhance the management of
interest accrued during the deferment period and res-
foreign exchange reserves in 2023 towards achieving
olution of non-performing loans. Targeted sector loans
exchange rate stability and support economic growth in
have been deferred till June 2024.
the country. Safeguarding the foreign exchange reserves
• In recognition of the significant contributions of
to maintain stability of peg exchange rate of the Ngultrum
the incentive scheme in boosting the remittance inflow
with India Rupee (INR) and also to meet the constitu-
and the foreign currency reserves, the Royal Monetary
tional requirements of twelve months of essential import
Authority of Bhutan has revamped and enhanced the in-
coverages continue to remain fundamental goal of RMA’s
ward remittance Scheme from 2 percent to 10 percent
monetary policy and reserve management policies. For
in December 31, 2022.
Bhutan, the peg exchange rate serves as nominal anchor
• Accorded conditional approval to eTeeru (Tashi
for achieving a low and stable price, thereby maintain-
Infocomm limited) for introducing Merchant Payment
ing the value and confidence in the Ngultrum. To sustain
through National Quick Response (NQR) code using
pegged exchange rate and support sustainable economic
sponsor bank model in the eTeeru mobile wallet service,
growth, the RMA continues to rely on the Cash Reserve
with an observatory period of six months to assess the
Ratio (CRR) and macro prudential policy measures to
viability and functionality of QR code payments through
regulate the domestic liquidity and credit growth.
eTeeru.
The recent pressure on foreign exchange reserves
• RMA also provided conditional approval to in-
were attributed to growing internal and external im-
crease transaction limit for Tourist in the goBoB (BoBL)
balances. The increased government expenditure and
mobile wallet service with an observatory period of six
rapid expansion of domestic credit from the Financial
months to assess the viability and consequences of in-
Institutes (FIs) over the period were identified as the key
creasing the transaction limits for the tourists.
factors driving Bhutan’s external imbalances and vulner-
The following guidelines, regulations, and policies
ability. The spillover impacts of expansion of domestic
were issued during 2022-23:
credit and government expenditure have been causing
• Prompt Corrective Action framework 2022
large and persistent current account deficits, leading to
• Framework for Charge-off and Transfer of NPLs to
an unsustainable external sector imbalance.
Off-Balance sheet
In response, to mitigate the rising external sector im-
• Rules & Regulations on loan origination and mon-
balances and minimize the impact of external reserves,
itoring 2022
the RMA has implemented monetary and macro pruden-
• Directive on treatment of Non-Performing Loans
tial policy measures. In October 2022 the RMA revised

• Directive on the reinstatement of Capital Conser- 2022-23 were designated as ‘specified securities’ under
vation Buffer (CCB) of 2.5% by December 2022 the FAR.
• Guidelines on Auction of seized properties 2022 • It was decided to fully restore the liquidity man-
Directives on requirements related to CIB agement framework instituted in February 2020, albeit
with some refinements to enhance its effectiveness.
• To facilitate global trade with emphasis on pro-
India moting exports from India and to support the increas-
ing interest of the global trading community in INR, an
Monetary Policy Stance additional arrangement for invoicing, payment, and set-
• Spillovers from high global food, energy and oth- tlement of exports/imports in INR was provided. Under
er commodity prices and volatile international financial this arrangement, settlement of trade transactions with
market movements exerted upward pressures on domes- any country can be done in INR through Special Rupee
tic inflation during 2022-23. Monetary policy remained Vostro Accounts of correspondent bank/s of the partner
focused on containing inflation and anchoring inflation trading country maintained with AD banks.
expectations. The policy repo rate was raised by a cumu- • Guidelines on establishment of Digital Banking
lative 250 basis points since May 2022, with the stance Units (DBUs) were issued to all domestic scheduled com-
shifting to withdrawal of accommodation to ensure that mercial banks (excluding regional rural banks, payments
inflation progressively aligns with the target (4+/- 2 per banks and local area banks).
cent). • Operationalization of CBDC Wholesale and Retail
• In liquidity management operations in support (e₹-W) pilot.
of the monetary policy stance, the Reserve Bank acti- • Certain principles, standards and procedures for
vated the standing deposit facility (SDF) in April 2022 compliance function in NBFC-Upper Layer (NBFC-UL)
at 25 bps below the repo rate as the new floor of the and NBFC-Middle Layer (NBFC-ML), keeping in view the
liquidity adjustment facility (LAF) corridor. The width of principles of proportionality, were introduced.
the corridor was thus restored to its pre-pandemic con- • Payments Vision 2025 was released outlining the
figuration of 50 bps. Surplus liquidity moderated during roadmap for payment ecosystem in India over the period
the year and the Reserve Bank conducted variable rate till December 2025.
repo (VRR) auctions on occasions to mitigate frictional • The UPI-PayNow linkage between fast payment
liquidity pressures. Banks’ deposit and lending rates as systems of India and Singapore was operationalized.
well as other market rates increased in tandem with the • The Reserve Bank announced enhancement to
policy repo rate. UPI by facilitating linking of RuPay credit cards.
Major Central Bank Policies 2022-23:

Highlights Maldives
• Modified interest subvention scheme for short-
term loans for agriculture and allied activities availed Monetary policy stance and announce-
through Kisan Credit Card (KCC) was extended to farmers ments in 2022
during the financial years 2022-23 and 2023-24, with the In 2022, MMA continued to support the banking sys-
applicable lending rate of 7 per cent and rate of interest tem by carrying out foreign exchange market interven-
subvention of 1.5 per cent. tion, to alleviate the heightened exchange rate pressures
• All new issuances of central government securi- within the economy, while fully reverting the measures
ties (G-secs) of 7-year and 14-year tenors (including the taken in response to the Covid-19 pandemic. As such, in
current issuances) were designated as ‘specified securi- October 2022, the MRR for foreign currency deposits was
ties’ under the fully accessible route (FAR). All Sovereign reverted to 10% after being lowered temporarily to 7.5%
Green Bonds issued by the government in the fiscal year in April 2020 and further lowered to 5% in July 2020.

However, the MRR for local currency deposits which user-friendly interface, and contains time-series eco-
was reverted from 7.5% to 10% in 2021, remained un- nomic and financial data that is most relevant to central
changed in 2022. banking. Starting with a dashboard of key economic and
With the rise in global inflationary pressures and a financial indicators covering different areas, Easy Data
significant surge in oil prices during 2022, foreign cur- helps users visualize data through interactive charts. It
rency shortages persisted in the domestic economy. To also allows users to create a personal basket of indicators
address the issue, the MMA increased foreign exchange that they would like to frequently use for later retrieval.
intervention to commercial banks and state-owned en- It also offers selected time series data compiled and dis-
terprises (SOEs) to accommodate for essential imports seminated by other national organizations, regulators,
such as fuel, staples and medicine. Further, to maintain an and trade and manufacturing associations.
adequate level of gross international reserves and bolster Farmers’ Financial Literacy & Awareness Promo-
market confidence, in December 2022, the MMA availed tion: State Bank of Pakistan (SBP) has launched a series
US$100 million through a foreign currency swap agree- of videos in national and regional languages about ag-
ment between RBI and MMA. In addition to this, effective riculture financing products and procedures to create
1 December 2022, the MMA commenced the Commodity awareness among the farming communities across the
Murabahah Facility (CMF) Overnight Deposit Facility un- country, especially in the underserved areas. These vid-
der the Shariah concept of Commodity Murabahah, which eos will be disseminated through social media and digital
allows Islamic commercial banks and Islamic commercial platforms of SBP and all agriculture lending banks. Lack
banking windows to place their excess funds at the MMA of awareness among farmers about agriculture financ-
overnight. ing products and services remains one of the challenges
No further operational reforms were made to open for banks to access rural markets and extend outreach
market operations, standing facilities, or any other mon- of formal financial services to the farming communities.
etary policy instruments during 2022. Excess liquidity in In order to address this lack of awareness and to broad-
the banking system continues to be absorbed through en the scope of SBP’s campaigns, the potential of digital
the overnight deposit facility which is remunerated at media is being explored. It is expected that these videos
1.5% per annum. The overnight Lombard facility also will help the farming community to overcome their re-
remained open for all commercial banks, to borrow from luctance in availing credit from banks.
the MMA on an overnight basis at 10% per annum.
SBP adopts more AAOIFI Shariah Standards for
Islamic Banking Industry : After a comprehensive pro-
Pakistan cess of evaluation and deliberations with the internal
State Bank of Pakistan has undertaken some crucial and external stakeholders, keeping in view our local
policy measures some of which includes: environment, the State Bank of Pakistan (SBP) has ad-
Adjusting the Policy Rate : To respond to emerging opted four more AAOIFI Shariah standards on i) Salam
developments and to pursue its objective of price sta- and Parallel Salam, ii) Istisna'a and Parallel Istisna'a, iii)
bility, SBP increased the policy rate by a cumulative 600 Combination of Contracts and iv) Irrigation Partnership
bps (to 22%) since the start of CY23. (Musaqat), with certain clarifications and amendments.
Easy Data : SBP has launched Easy Data Portal to Strengthening Shariah compliance of Islamic banking in-
ensure efficient, timely and reliable data dissemination dustry in line with the best international practices is one
and support informed decision-making by households, of the key pillars of SBP’s 3rd Strategic Plan for Islamic
firms, governments, academics, and other stakehold- Banking Industry 2021-25. Under the plan, SBP has been
ers, including financial market participants. Easy Data adopting Shariah standards of Accounting and Auditing
currently hosts economic and financial time series Organization for Islamic Financial Institutions (AAOIFI)
data on more than 7,000 variables neatly grouped into in a systematic and gradual manner. The standardization
around 100 datasets. Easy Data offers an intuitive and and harmonization in Shariah practices and procedures

are helping in elevating the local Islamic banking industry has automated the verification of refinance claims under
at par with the international best practices. With adop- the Export Finance Scheme (EFS). Automated verification
tion of these four standards, the total number of AAOIFI will significantly enhance the efficiency of refinance op-
Shariah standards adopted by SBP has reached twenty erations and improve exporters’ access to liquidity. The
while work on remaining standards is underway. new automated system allows banks to generate provi-
SBP extends Online Portal to EMIs, PSOs and sional export performance of their exporters during the
PSPs: In order to promote digitalization and encourage concluded financial year, review it with the exporter and
eco-friendly practices, the State Bank of Pakistan (SBP) submit the finalized performance to the system electron-
has developed online portal called SBP Regulatory Ap- ically. Subsequently, the system will verify the finalized
proval System (RAS) to enable regulated entities (i.e. performance and calculate loan entitlement, which will
banks, Electronic Money Institutions, Payment System be granted by SBP-BSC upon banks’ request. The au-
Operators, Payment Service Providers etc.) to submit tomated verification of refinance claims is expected to
cases/proposals and receive regulatory decisions digi- conserve resources and enhance efficiency by reducing
tally. Earlier in October 2020, SBP launched the SBP FX turnaround time and change of hands
RAS for end-to-end digitization of Foreign Exchange (FX) SBP signs MoU with Zameen.com to utilize data on
related case submission process. In a similar vein, RAS real sector: State Bank of Pakistan (SBP) has signed a
for Payment Systems Policy & Oversight is being rolled memorandum of understanding (MoU) with Zameen.
out for industry-wide implementation. RAS will make com according to which the latter will provide data on
submission of requests and proposals by regulated en- the prices and rental costs of residential and commercial
tities efficient, easy to track and paperless. Moreover, it properties in the country’s metropolitan areas. This data
will also allow the dissemination of regulatory decisions will subsequently be used by SBP to analyze house prices,
to regulated entities electronically through RAS portal. develop related indices and use the information in its
Media campaign on Asaan Mobile Account : The State publications, working papers and reports. The aggregate
Bank of Pakistan (SBP), in collaboration with Pakistan house price and rental indices will also be available on
Telecommunication Authority (PTA) and UK's Foreign, SBPs data portal - Easydata for the last four years.
Commonwealth and Development Office (FCDO), un- SBP modifies foreign exchange regime to promote
veiled the mass media campaign for Asaan Mobile Ac- documentation in forex transactions: In order to fur-
count (AMA) a flagship initiative under the National Fi- ther enhance transparency and promote documentation
nancial Inclusion Strategy, to mark its formal launch. AMA in the foreign exchange transactions, State Bank of Pa-
aims to address financial exclusion challenges faced by kistan has advised the Exchange Companies that all for-
the unbanked segments by providing them an easy, af- eign currency sale transactions of USD 2,000/- or above
fordable and digital access to financial services, by simply (equivalent in other currencies) against PKR should only
dialing a USSD code *2262#. The launch of mass media be conducted through payment modes, such as bank
campaign by SBP will help in creating general awareness transfer/cheques from the personal bank account of the
about the AMA, its ease of use and allied benefits to at- customer. This step is also focused on encouraging the
tract the unbanked segments into the formal financial general public to use various banking channels, which
network. The mass media campaign will cover all major are generally more secure, to fulfill their genuine foreign
TV, radio, print and digital platforms, across the country. exchange needs.
Besides Urdu, the campaign will also be run in regional SBP signs MOU with PBoC on establishing RMB
languages to ensure maximum outreach, awareness, and clearing arrangements: State Bank of Pakistan (SBP)
understanding of the product by all Pakistanis across the and Peoples Bank of China (PBoC) have signed an MOU on
country establishing RMB (Chinese currency) clearing arrange-
SBP automates verification of refinance claims un- ments in Pakistan. The MOU was signed by Governor SBP
der Export Finance Scheme to facilitate Mr. Jameel Ahmad and Governor PBoC Mr. Yi Gang. The
Exporters and Bank : In continuation of steps taken establishment of the RMB clearing arrangement in Pa-
for ease of doing business, State Bank of Pakistan (SBP) kistan will further boost usage of RMB for cross-border

transactions among Chinese and Pakistani enterprises SBP releases new Governor’s Annual Report 2021-
and financial institutions. This will also promote bilateral 22: Governor’s Annual Report 2021-22, the first such re-
trade and investment between the two countries. port by SBP, is published Under Section 39 (1) of the State
SBP rationalizes Limits for Foreign Exchange Cash Bank of Pakistan Act, 1956 (as amended up to January
Carrying for travel and Cross Border 2022), which requires the Governor to submit annual
Transactions through Debit or Credit Cards: State report to the Majlis-e-Shoora (Parliament) regarding
Bank of Pakistan (SBP) has reviewed the existing for- the achievement of the Bank's objectives, conduct of
eign currency cash carrying limits for travel purposes, monetary policy, state of the economy and the financial
and decided to further rationalize the same. As per the system. In consideration of this stipulation, as well as
revised limits individuals with age 18 years and above SBP’s objectives as set out in section 4(B) of the amended
(adults) can now take out of Pakistan foreign currency act, the Report is divided into four distinct chapters that
(FCY) equivalent to USD5,000 per visit, while those below shed light on The State of Pakistan’s economy and Finan-
the age of 18 years (minors) can carry out FCY equivalent cial System; Price Stability and the Conduct of Monetary
to USD2,500 per visit. Further, the annual ceiling to take Policy; Financial Stability; and Measures to Support the
out FCY for adults and minors shall be USD30,000 and Government’s Economic Policies.
USD15,000, respectively. In addition, the State Bank of SBP issues NOCs to five applicants for establishing
Pakistan (SBP) has observed that debit/credit cards are Digital Banks: State Bank of Pakistan (SBP) has issued
being used for transactions, which are not aligned with no objection certificates to the following five (05) ap-
the profile of the individual or are intended for commer- plicants for establishing digital banks: (i) Easy Paisa DB
cial purpose. Therefore, an annual limit of USD30,000 (Telenor Pakistan B.V & Ali Pay Holding Ltd.)1 ; (ii) Hugo
has been prescribed for individuals for international Bank (Getz Bros & Co., Atlas Consolidated Pte. Ltd. and M
transactions. & P Pakistan Pvt. Ltd.); (iii) KT Bank (Kuda Technologies
Governor SBP launches Environmental & Social Ltd., Fatima Fertilizer Ltd. and City School Pvt. Ltd.); (iv)
Risk Management (ESRM) manual in high-level sus- Mashreq Bank (Mashreq Bank UAE); (v) Raqami (Ku-
tainable banking conference: SBP launched the ESRM wait Investment Authority through – PKIC and Enertech
Implementation Manual for banks and DFIs as part of Holding Co.). In January 2022, SBP introduced a Licensing
SBP’s ongoing efforts to promote green banking in Pa- and Regulatory Framework for Digital Banks in line with
kistan. The ESRM manual is a procedural guide for the international best practices and decided to issue up to
banks/DFIs to establish their environmental & social risk five (05) digital banks’ licenses. The Framework was the
management systems, as advised in SBP’s Green Banking first step towards introducing full-fledged digital banks
Guidelines (GBGs). Governor, SBP, encouraged the entire in Pakistan. The digital banks are expected to provide
banking industry to take full benefit of the manual to es- all the banking services through digital means without
tablish their ESRM systems and procedures. State Bank any need for their customers to visit the bank branches
will keep on providing necessary support and guidance physically. In response to SBP’s Licensing and Regulatory
at every stage of ESRM implementation. Framework for digital banks, SBP received twenty (20)
SBP introduces Whistle Blowing Forum for identi- applications from a diverse range of interested players
fication of Unauthorized Foreign Exchange such as commercial banks, microfinance banks, electron-
Activities by Public: In order to promote an environ- ic money institutions and Fintech firms by March 31,
ment of accountability and integrity, SBP has introduced 2022. Going forward, each of these five (05) applicants
a dedicated email address using which public at large can will incorporate a public limited company with Securities
report to SBP any unauthorized foreign exchange activity. and Exchange Commission of Pakistan. Afterwards, they
This email may also be used to report any unauthorized will approach SBP for In-Principle Approval for demon-
activity carried out by an exchange company or where strating operational readiness and for commencement
exchange company is not providing system generated of operations under the pilot phase. Subsequently, they
receipt of the currency exchange transaction. will commercially launch their operations after obtaining
SBP’s approval.

State Bank Enhances Control Measures Require- The target of the monetary policy is to keep inflation
ments to Protect Customers from Digital within 6.5 percent and maintain foreign exchange re-
Banking Frauds: In a major policy directive for com- serves sufficient to cover the imports of goods and ser-
bating the menace of social engineering and other digital vices for at least 7 months.
banking frauds, State Bank of Pakistan (SBP) has directed For strengthening monetary management and im-
commercial banks and Microfinance Banks to improve proving liquidity management, overnight liquidity facility
their digital fraud protection controls and processes by (OLF) has been made available to the banks and financial
taking timely remedial and control preventive measures institutions(BFIs) from December 2022. Similarly, open
failing which they shall be held responsible for loss of market operations (OMOs) have been made more rule
any customer funds due to delay on their part. These based whereby OMO interventions will take place if the
new measures are part of wider SBP objective to enhance weighted average interbank rate deviates by the specified
digital financial inclusion and promote digital financial percentage point away from the policy rate. In addition,
services by creating and enhancing customer trust in lender of the last resort facility has been introduced with
the safety, security & soundness of the digital banking clear provisions regarding the qualification of the related
ecosystem. institutions, instruments, and procedures to follow while
using the facility.
The statutory liquidity ratio has been increased to 12
Nepal percent for the commercial banks and 10 percent for de-
velopment banks as well as finance companies effective
Monetary Policy Stance from mid-January 2023.
The stance of monetary policy for 2023/24 has been Since 2022/23, a monetary policy rule has been intro-
kept cautiously accommodative to support economic duced which takes inflation target and the import capaci-
activities while maintaining price and external sector ty of foreign exchange reserves as the basis for setting the
stability. For this, the policy rate (repo rate) has been policy rate. Recently, natural rate of interest rate has also
reduced by 50 basis points to 6.5 percent and the lower been taken as reference for determining the policy rate.
band of the interest rate corridor has been reduced by It has made the process of setting the monetary policy
100 basis points to 4.5 percent. The policy focuses on stance more transparent and data driven.
channelizing resources to productive sector and sup- Working capital guideline has been implemented in
port domestic production.In addition, the policy aims order to enhance the utilization of financial resources be-
to strengthen financial stability by enhancing the effec- ing provided by the BFIs and promote financial stability.
tiveness of the monitoring, regulation and supervision Similarly, 'Digital Lending Guidelines' have been put into
of large borrowers, reducing the over-concentration of action to simplify the process of lending from the BFIs
credit, prioritizing SME loans and enhancing the quality through digital channels, reduce the cost of lending and
as well as accessto credit. increase access to credit.
Recent Policy Measures by Nepal Rastra

Bank Sri Lanka
The monetary policy for 2023/24 has been cautiously
loosened to facilitate the expansion of economic activi-
Monetary Policy Stance
The Central Bank of Sri Lanka, which followed tight
ties. Under this, the policy repo rate under the interest
monetary policy since August 2021, commenced easing
rate corridor has been reduced by 50 basis points to 6.5
its monetary policy stance in early June 2023 consid-
percent and the deposit collection rate under the cor-
ering the moderation of inflation, benign inflation ex-
ridor has been also reduced by 100 basis points to 4.5
pectations and the easing of the balance of payments
percent. Earlier, the bank rate, which also works as the
pressures. The Central Bank reduced its policy interest
upper band of the corridor, was reduced from 8 percent
rates i.e., the Standing Deposit Facility Rate (SDFR) and
to 7.5 percent.
Standing Lending Facility Rate (SLFR) by a total of 450 proceeds of goods from 25 per cent to 15 per cent, ef-
basis points in June and July 2023, while the Statutory fective from 27 February 2023, in order to encourage
Reserve Ratio (SRR) applicable on all rupee deposit lia- market driven foreign exchange activities in the domes-
bilities of licensed commercial banks was also reduced tic foreign exchange market. Subsequently, the operating
by 2 percentage points to 2.00 per cent from mid-Au- instructions on the “Incentive Scheme on Inward Worker
gust 2023, to ease liquidity strains in the banking system. Remittances” and “Repatriation of Export Proceeds into
Moreover, interest rate caps were imposed on selected Sri Lanka was revoked on 03 March 2023.
lending products in late August 2023 and directed banks • Directions No. 01 of 2023 were issued in Feb-
to expedite the pass through of the easy monetary policy ruary 2023 permitting Authorized Dealers to open and
stance to market lending interest rates. maintain Special Foreign Currency Accounts (SFCA) - In-
vestee, out of proceeds received into the share capital
Table 2: Changes in Policy Interest Rates made since of the company from a non-resident investor, provided
August 2021 investee has future requirements to meet payments for
current transactions and repayments of foreign currency
loans accommodations obtained under the provisions of
Foreign Exchange Act No. 12 of 2017.
• Revocation of the Operating Instructions were
issued by the Central Bank to Licensed Banks on “Man-
aging Intraday Volatility of the Exchange Rate” on 12 May
2022 with effect from 07 March 2023.
• In May 2023, Banking Act Directions were is-
sued, revoking the Banking Act Directions No. 03 of 2022
and the Banking Act Directions No. 02 of 2023 on Margin
Requirements Against Imports.
• On August 2023, Monetary Board issued an or-
der on the interest rates by fixing a maximum rate for cer-
tain applicable on Sri Lanka Rupee (LKR) denominated
*Close of Business lending products of licensed commercial banks (LCBs)
Note: SDF- Standing Deposit Facility, SLF- Standing Lending Fa- and license specialized banks (LSBs)
cility
• Central bank of Sri Lanka granted approval for
LankaPay (Pvt.) Ltd. (LPPL) to join with regional and
Highlights of other Central Bank Policies country payment networks authorized and regulated by
the respective country/authority and revised the multi-
taken place in 2023
tiered Liability Manager Limit structure for Common
Following are the major policy decisions took by the
ATM Switch (CAS) and Common Electronic Fund Trans-
Central Bank apart from the Monetary Policy stance and
fer Switch (CEFTS) to support the growth of volume and
policy rate changes mentioned earlier.
value of transactions conducted through CAS and CEFTS.
• A Circular was issued with effect from 03 January
2023 adjusting the Central Bank’s Rate of Interest on Ad-
vance (Bank Rate) in line with the latest available Average
Weighted New Deposit Rates (AWNDR) published by the
Central Bank with a margin of +300 basis points.
• Reduction of weekly mandatory foreign ex-
change sales to the Central Bank by licensed banks on
account of converted inward workers’ remittances, con-
verted service sector related exports proceeds/receipts,
and the residual value of mandatorily converted export
Trends in Macroeconomic surveillance

indicators in SAARC Countries
Afghanistan the freeze on international reserves of Afghanistan
are the main factors affecting the economic growth of
Lately, Macroeconomic indicators are showing the country, Despite the challenges, economic growth
signs of improvement. Afghanistan experienced a is expected to improve for the current fascial year.
substantial change in the economic sphere, as a con- Reduced Trade deficit is one of many positives
sequence of the political transition, foreign assets in current macroeconomic indicators, Afghanistan's
of Da Afghanistan Bank were frozen, and banking exports almost doubled last year (2022), and the to-
channels were damaged resulting in a drop in the tal exports accounted for 22% of the total trade. In
economic activities of the country. The current gov- the year 2021, the total exports were a mere 13% of
ernment with its commitment to stimulating eco- the total trade.
nomic activities, has had quite a few successes. Da Af-
ghanistan Bank can implement a balancing monetary
policy resulting in stabilizing the exchange rate and Bangladesh
controlling inflation. Afghani is the best-performing
currency against USD in the region of South Asia and The Bangladesh economy demonstrated strong re-
inflation has been controlled promptly. Humanitar- silience against the Covid-19 shocks and rebounded
ian Assistance has also played a key role in the sta- sharply. The economy witnessed a real GDP growth
bilization of macroeconomic indicators. of 6.94 percent in FY21 and 7.10 percent in FY22.
The annual inflation rate in 2022 was recorded However, provisional estimates from the Bangladesh
at 13.82% which left the common man with a big Bureau of Statistics (BBS) indicate a slight decelera-
gap in purchasing power, since then Da Afghanistan tion to 6.03 percent in FY23, attributed to the disrup-
Bank and the current government have managed to tive global supply chain effects stemming from the
tame the inflation. The average headline inflation in Russia-Ukraine conflict. For FY24, the growth target
the first quarter of 2023 stands at 3%, Inflation is has been set at 7.50 percent, bolstered by resilient
now in the single digits and expected to remain so. domestic demand, robust export performance, and
Afghanistan heavily relies on imported goods, anticipated favorable external developments.
currency depreciation comes with a multiplier ef- On the inflation front, Bangladesh has witnessed
fect on the prices of goods. After a substantial drop an upward trajectory, notably following fuel and en-
in the value of the national currency, fortunately, the ergy price adjustments during the initial quarter of
central bank has been able to stabilize the value of FY23. The 12-month average inflation rate climbed
Afghani by implementing prudent monetary policy. to 9 percent by the end of FY23, up from 6.15 per-
The average exchange rate against USD for August cent in FY22. This inflationary pressure is driven
is estimated at 83.33 which shows an appreciation by elevated prices of imported goods and services,
of 7% when compared to the same period in 2022. supply chain disruptions due to the Russia-Ukraine
Economic activities have been on a declining tra- conflict, currency depreciation, and fuel & energy
jectory, especially after the political change in the price hikes. Encouragingly, recent data suggests a
country. The restrictions on the banking sector and 12-month average inflation rate of 9.20 percent in
July 2023, with expectations of a gradual decrease

in the coming months due to coordinated efforts by from 7.09 percent and 3.97 percent recorded in FY22.
the government and the Bangladesh Bank. Furthermore, the weighted average call money rate
Fiscal indicators reveal noteworthy develop- stood at 6.32 percent as of August 30, 2023, indi-
ments. Total tax revenue surged by 8.48 percent, cating ample liquidity in the money market despite
reaching Taka 2312.65 billion during the July-March being lower than the policy rate.
period of FY23 compared to the corresponding pe- The current account deficit in the Balance of Pay-
riod in FY22. The national debt, as a percentage of ments (BOP) has steadily narrowed to USD 3.33 bil-
GDP, rose to 35.28 percent in FY23, up from 33.63 lion in FY23 from a huge deficit of USD 18.64 billion
percent in FY22. Domestic debt accounted for 22.33 in FY22. This is primarily due to a reduction in the
percent of GDP in FY23, a slight increase from 21.35 trade deficit, resulting from a significant decline in
percent in FY22, while external debt also inched up import payments (-15.8 percent on fob basis) amid
to 12.95 percent in FY23, compared to 12.28 percent healthy export growth (6.3 percent on fob basis),
in FY22. The fiscal deficit (including grants) widened along with a moderate rise in remittances (2.75 per-
to 5.05 percent of GDP in FY23, up from 4.55 percent cent). Nevertheless, the overall balance still posted a
in FY22. substantial deficit of USD 8.22 billion in FY23, largely
Moving to monetary indicators, the broad money attributed to a deficit in the financial account. Recent
supply (M2) exhibited year-on-year growth of 10.48 data indicates a 15.26 percent growth in commod-
percent as of June 2023, surpassing the 9.43 percent ity exports in July of FY24, while remittances and
recorded in June 2022. Meanwhile, domestic credit LCs opening for imports dipped by 5.88 percent and
expanded by 15.25 percent in June 2023, compared 31.19 percent, respectively, in July of FY24. The Ban-
to 16.10 percent in June 2022. Private sector credit, gladeshi Taka depreciated by 15.05 percent against
on the other hand, increased by 10.57 percent in June the US dollar in FY23, closing at 108.34 from 92.03
2023 compared with a 13.66 percent increase in the in FY22. The foreign exchange reserves, as of end
same period last year. Reflecting this, the weighted June 2023, stood at USD 31.2 billion, a sufficient cov-
average interest rate on lending and deposits rose to er for at least 5 months' worth of import payment
7.31 percent and 4.38 percent, respectively, in FY23, obligations.

Bhutan taxes in 2022-23. With the rising demand for resourc-

es to boost the economic activities and also increased
Bhutan’s real GDP growth was recorded at 5.2 proposals for the capital budget to accelerate the Plan
percent in 2022, largely contributed by revival of activities, the fiscal deficit is expected to remain elevat-
performance in the service and industry sectors. ed at 9.90 percent of GDP in the medium-term.
The service sector which includes hotel and restau- Current account deficit widens in FY 2023 to 34.5
rant experienced a growth of 31.6 percent indicat- percent of GDP from 33.2 percent in FY 2021/22. The
ing steep recovery from the contraction during the higher current account deficit was attributed to dete-
Covid-19. The electricity sector which constitutes rioration of trade balance due to increase in imports
around 15 percent of GDP and also main drivers of of non-essential items, followed by growth in sec-
the economic growth experienced a negative growth ondary income receipts. However, the positive flows
of -1.14 percent in 2022. With easing of complete in financial and capital accounts turned the overall
restriction and normalization of economic activities, balance of payment positive and sufficient to finance
private consumption picked to 5.5 percent in 2022 as more than 12 months of merchandise and service pay-
compared to negative 2.4 percent. With the ongoing ments. While external position remained vulnerable
geopolitical tension, spillover effect of tightening of due to the pandemic, the overall balance of payment
monetary policy in advance economies and adverse was expected to improve further with a decrease in
impact of global climate change, the economic growth the import of non-essential goods and services and
is estimated to grow slower at 4.2 percent in 2023. continued undisrupted export of electricity.
With gradual pick-up in economic activities, the over- While the external debt position at 119 percent of
all unemployment rate increased from 3.4 per cent in GDP in 2022-23 was a major concern and a challenge,
2021 to 5.9 percent in 2022. however, more than 60 percent of the external debt
Headline inflation recorded average of 3.8 percent constitute hydro-power project debt, which is on a
in June 2023. The inflation was largely influenced by contractual basis and is self-liquidating. With the in-
rise in prices of food (3.7percent) compared to non- creasing need to fill up the government resources gap,
food (3.1 percent). Supply chain disruptions in the public debt was expected to increase by 136.1 percent
food sector are expected to continue, pushing up food of GDP in 2022-23 from Nu. 256.87 billion in 2021-22,
prices over the medium-term. Nevertheless, a sizeable both contributed by domestic and external borrowing.
drop in aggregate demand will offset potential cost- The domestic borrowing is largely influenced by the
push inflation; thereby, overall inflation is expected government borrowing through issuance of long-term
to remain at around 5 percent in the medium-term. bonds to finance the containment measures for the
Fiscal deficit was recorded at 4.8 percent of GDP in Covid-19 pandemic.
2022-23 as compared to 7.9 percent in 2021-22. The In the absence of a vibrant capital market, the
lower deficit was attributed to a substantial increase in financial institutions remain the main source of in-
resources by 10.18 percent, on account of a significant vestment and lending avenue for private credit. The
increase of domestic revenue in the form of business total domestic credit outstanding was recorded at 10.2
percent in FY 2022-23.

India CPI headline inflation in India remained above

the upper tolerance level of 6 percent for 10 succes-
Macroeconomic Scenario sive months since January 2022, before moderating
The Indian economy exhibited robust resilience during November-December on seasonal easing in
in 2022-23 amidst the global turmoil and India’s real food prices. Inflation picked up again in January-Feb-
GDP recorded a growth of 7.2 percent in 2022-23 ruary 2023 to more than 6 percent before easing in
as compared to 9.1 percent in 2021-22. While both March-June 2023. In July 2023, inflation surged to 7.4
consumption and investment demand gained trac- percent primarily driven by spike in food prices. Core
tion, adverse external demand conditions and the inflation remained persistently elevated at around 6
resultant larger deficit in net exports dragged down percent during the year. The pick-up in headline infla-
growth in 2022-23. Contact-intensive activity grad- tion during the year 2022 was broad-based resulting
ually resuscitated during the year and the release of from pass-through of higher global commodity pric-
pent-up demand bolstered domestic activity. Quarter es (crude oil, metals and food prices) and adverse
wise, encouragingly, growth accelerated from a pace domestic weather conditions. The Monetary Policy
of 6.1 percent (year-over-year) in January-March Committee (MPC) raised the policy repo rate by 250
2023, to 7.8 percent in April-June quarter 2023. Gross basis points during May 2022- August 2023, in view
fixed capital formation stood at 34.7 percent of GDP in of containing price pressures.
April- June 2023 quarter on the back of rising capital Even as domestic economic recovery kept import
expenditure of both central and state governments, demand high, a slowdown in global demand weighed
adding resilience to the economy. on India’s exports. Notwithstanding a robust growth
Notes:
Year 2023 = April 2022-March 2023.
# Reserves as on End-March of the financial year and merchandise imports for the financial year.
@For Inflation, the data is calculated using CPI period averages.
*Domestic credit data pertains to ‘Net Bank Credit to Government’ and ‘Bank Credit to Commercial Sector’. GDP refers to GDP at Market Price at 2011-12 base.
** Pertains to central government only. Data for 2022-23 is as per revised estimates.
*** Data as on End-March.

in services exports and higher remittance receipts, the despite challenges posed by geopolitical and economic
widening of merchandise trade deficit and a higher uncertainties. Additionally, sectors closely linked to
outgo on the primary income (mainly reflecting pay- tourism, including transportation, communication,
ments of investment income) account led the current and wholesale and retail trade, also witnessed sub-
account deficit (CAD) to widen during the year from stantial growth throughout the year.
1.5 percent in January-March quarter to 3.7 percent After a year of low and stable inflation in 2021, the
in July-September 2022 quarter. Current account rate of inflation averaged 2.33% for 2022, according to
deficit, narrowed down to 2.2 percent of GDP in Oc- the rebased Consumer Price Index (CPI) data released
tober-December 2022 and further to 0.2 percent in by the Maldives Bureau of Statistics in April 2023. The
January-March 2023 quarter. Despite this, India saw increase in domestic inflation was driven mostly by
record-breaking exports at US$ 450.4 billion which high global commodity prices during the year, which
grew by 6.7 per cent in 2022-23. Petroleum prod- were brought on by global supply chain disruptions
ucts were the major driver of this export growth, and caused by the conflict in Ukraine.
among non-oil products, electronic goods, rice, organ- With regard to government finances, the overall
ic and inorganic chemicals, and drugs and pharma- fiscal deficit is estimated to widen to 14.18% of GDP
ceuticals were major contributors to exports. While in 2022, up from both the 13.85% recorded in 2021
the foreign direct investment (FDI) remained strong and the initial projection of 11.14% for 2022. Mean-
with US$ 28 billion this year, net Foreign Portfolio while, public external debt as a percentage of GDP
Investment (FPI) to India demonstrated significant is estimated to fall and reach 37.17% in 2022 from
volatility. India’s forex reserves stood at USD 594.9 38.30% in 2022, while public debt level (excluding
billion as on August 25, 2023. guaranteed debt) is estimated to increase to 95.81%
The gross fiscal deficit (GFD) of the Union Gov- of GDP during 2022, from 93.78% in 2021. The ex-
ernment declined from 6.75 percent of GDP in 2021- pansion in national debt to MVR105.73 billion during
22 to 6.45 percent of GDP in 2022-23. Reiterating its 2022 from MVR94.40 billion at the end of 2021 was
commitment to fiscal consolidation, the Government contributed by the rise in both external and domestic
has budgeted GFD at 5.9 percent of GDP in 2023-24. debt of the government. The growth in the external
In nutshell, several shocks tested the resilience of borrowing of the government during the year mainly
the Indian economy in 2022-23. On the back of sound reflected external financing acquired as buyer’s credit
macroeconomic policies, India’s growth momentum and through the issuance of bonds.
is likely to be sustained in 2023-24. On the external front, as per revised estimates
made in March 2023, the current account deficit is
estimated to widen from 8.44% to 16.73% of GDP
Maldives in 2022. The widening of the current account defi-
cit was mainly due to the expansion of merchandise
Macroeconomic Vulnerability Indicators trade deficit, which was driven by an increase in im-
According to the revised estimates of June 2023, port expenditures amid high global commodity prices
the Maldivian economy is estimated to have expand- as well as the ongoing recovery of domestic demand
ed by 13.85% in 2022, well above the initial growth following the pandemic. Meanwhile, gross interna-
projection of 13.50% made in October 2020, and much tional reserves as a percentage of imports declined
lower than the 41.75% growth recorded in 2021. In in 2022 owing to both the increase in the value and
2022, the robust growth in economic activity was pri- the volume of merchandise imports, and the decline
marily driven by the ongoing revival of the tourism in gross international reserves—primarily due to the
industry—the backbone of the country's economy— increase in short-term foreign liabilities.

Nepal to the timely and appropriate policy response from

Nepal Rastra Bank and increase in remittances. In
2021/22, Nepal faced huge current account deficit and
Economic activities have been affected in Nepal
decline in international reserves. In that year, current
from the decline in domestic demand, global econom-
account deficit stood 12.6 percent of GDP and BoP
ic slowdown and increase in prices at international
deficit stood 5.2 percent of GDP. However, in 2022/23,
market. As per the preliminary estimates of National
increase in remittances by 21.2 percent and decline
Statistics Office, economic growth is estimated to be
in imports by 16.1 percent have helped in improving
1.9 percent in 2022/23 compared to 5.6 percent a
the external sector deficit. The current account deficit
year ago. Growth rate has been dragged downwards
has been contained at 557 million USD and BOP has
by the contraction in construction, manufacturing and
registered a surplus of 2.21 billion USD.
trade-related activities. However, increase in hydro-
Foreign exchange reserve has increased to 11.74
power production, rebound in tourist arrival and an
billion USD in mid-July 2023 compared to 9.54 billion
uptick in remittances are likely to support economic
in mid-July 2022. It is sufficient to cover the prospec-
activities.
tive imports of goods and services for 10 months.
Consumer inflation has moderated in the recent
Tourist inflow in 2022/23 increased by 130.6 per-
months. Average consumer inflation stood at 7.74
cent to 862,992 compared to an inflow of 374,147
percent in 2022/23 which is higher than the target
in 2021/22. In addition, the number of outbound
of Monetary Policy for 2022/23. Inflation was 6.32
workers has increased by 40.3 percent in 2022/23.
percent a year ago. Inflation has been mainly driven
These developments are likely to further support the
by the rise in prices of energy and food items in the
external sector stability.
international market and devaluation of Nepalese
Resource mobilization of the government has been
Rupee vis-à-vis US dollar. Inflation is likely to decline
affected due to decline in imports which provides al-
further in 2023/24 supported by lower energy and
most a half of the basis of revenue collection. Slow-
food prices in the international market and remain
down in domestic demand has also led to the decline
within the target of monetary policy.
in revenues. In 2022/23, revenue mobilization de-
External sector pressure has largely subsided due
clined by 9.3 percent whereas expenditure increased

by 9.1 percent. This has resulted into a higher budget try and services sectors slowing down to 1.5%, -2.9%
deficit of 7.4 percent of GDP compared to 3.4 percent and 0.9% respectively in FY23 from 4.3%, 6.8% and
a year ago. 6.6% respectively in FY22. In particular, the Large
Nepal's external debt is relatively lower. As of Scale Manufacturing activity shrank considerably to
mid-July 2023, the ratio of external debt to GDP stood -10.3% in FY23 from 11.7% in FY22. The major contri-
20.3 percent and the ratio of general government debt bution to this contraction came from the sectors which
to GDP stood 41.2 percent.
were affected by the measures to stabilize the external
On the monetary and financial front, liquidity
account. Agriculture sector’s performance was largely
constraints have relaxed, supported by increase in
affected by continued impact of flash floods as head-
remittances and contained imports. In 2021/22, li-
quidity drained from the banking system due to large winds to the restoration of supply chain infrastructure
outflow of resources through imports, creating an up- remain significant due to less than expected materi-
ward pressure in interest rates. Interest rates are now alization of resources required for reconstruction ef-
declining which is likely to boost private investment. forts. The industrial performance was affected by the
In 2022/23, deposits increased by 12.3 percent on import rationalization measures due to significant de-
y-o-y basis compared 9.0 percent a year ago. Private pendence of industry on imported raw materials and
sector credit increased by 4.6 percent on y-o-y basis intermediate goods. As a result, output of electronics,
compared to 13.3 percent a year ago. pharmaceuticals, automobiles, etc. saw a significant
Lending rate has slightly declined to 12.30 percent contraction. The performance of services sector also
in July 2023 from 13.03 percent in March 2023. Given remained lackluster due to sharp demand contraction
the ease in liquidity in the banking system during the amid consolidative economic policies.
recent months, interest rate is likely to decline further. The current account deficit improved significantly
to 2.6 Billion $s (0.7% of GDP) in FY23 from 17. 2 Bil-
Pakistan lion $s (4.6% of GDP) in FY22. The major contribution
to this improvement came from reduction in imports
to 52 Billion $s in FY23 from 72 Billion $s in FY22.
Macroeconomic stabilization continued to be the
Nevertheless, the exports also witnessed a contraction
policy priority during the FY22 and 1H-FY23. The fall-
to 27.9 Billion $s in FY23 from 32.5 Billion $s. The
out of flash floods, adverse global economic conditions,
contraction in export was partly due to the imports
uncertainty surrounding the completion of IMF pro-
rationalization due to dependence of exports on the
gram’s 9th review, the foreign exchange constraints,
imported raw materials, intermediate good and ma-
and political instability exacerbated the underlying
chinery. In addition, high inflation and the slowdown
domestic structural issues posing challenges to mac-
in the advanced economies due to aggressive policy
roeconomic stability. SBP raised the policy rate by a
stances by the central banks meant lesser demand for
further 825 bps in FY23, on top of the 675 bps increase
exports. Moreover, the global uncertainties, high infla-
during FY22. On the fiscal side, the government resort-
tion in developed economies and strong demand for
ed to curtail federal expenditures on grants, subsidies
$ liquidity from Afghanistan also impacted the remit-
and development. The policy measures introduced by
tances which fell from 31.2 Billion $s in FY22 to 27.0
the government and the central bank were successful
Billion in FY23. The FX reserves held by SBP fell from
in addressing the macroeconomic imbalance continu-
9.9 Billion $s in FY22 to 4.5 Billion $s in FY23. This
ing with its contractionary stance.
was due to unavailability of Eurodollar liquidity amid
After a sharp rebound of 6.1% in FY22, the GDP
increased CDS spreads as well as due to aggressive
growth dropped to 0.3% in FY23. This slowdown
monetary tightening by federal reserves. Moreover,
was broad based with growth in agriculture, indus-
the under-materialization of donor commitments for
flood rehabilitation as well as multilateral funds due in IMF program kept the overall increase relatively
to uncertainties on IMF program were major factors contained.
for this decrease. The money supply (M2) growth (Year-on-Year)
The inflationary pressures continued to persist, in- decelerated during Jul-Aug FY24 to around 13.8 per-
flation clocked in at 29.4% YoY in June FY23 vs 21.3% cent as of end August 2023 against 14.2 percent as
YoY in June FY22. Moreover, the 12MMA clocked in at of end-June 2023. This was primarily driven by a
29.2% in June FY23 as against 12.2% in June FY22. slowdown in Net Domestic Assets (NDA), while Net
Elevated inflation expectations, alongside a range of Foreign Assets (NFA) improved backed by higher ex-
domestic supply side factors, including reduced supply ternal inflows. NDA deceleration was, primarily, owing
of food and essential commodities amid floods, depre- to higher net retirements in private sector credit (PSC)
ciation of PKR, imports rationalization measures, ad- as PSC declined by 1.5 percent as of end August from
ministrative increase in electricity and fuel prices and 0.8 percent decline in June 2023. The growth in net
second round effects of food and energy prices were budgetary borrowing from banking system inched up
the main factors behind persistently high inflation. to 21.9 percent as of end August, 2023 compared to
The gross public debt increased to 62.88 Trillion 20.2 percent at end June 2023. Similar to M2, growth
Rs (74.3% of GDP) by June FY23 from 49.24 Trillion in reserve money also decelerated by 10.1 percent as
Rs (73.9% of GDP) in June FY22. This increase was of end August, 2023 compared to 22.5 percent growth
largely driven by the dependence of Government on as of end June, 2023. This deceleration reflects the
domestic debt amid reduced external debt flows and significant reduction in currency in circulation which
the translation effect of exchange rate depreciation brought currency to deposit ratio down to 36.7 per-
on the government external debt. Nevertheless, the cent as on Aug 31, 2023, compared to the 39.4 percent
government’s continued drive for fiscal consolidation at comparable period last year.

Sri Lanka Price Situation

Following the recent high inflation episode stem-
Recent Overall Macroeconomic Developments ming from both domestic and global supply factors,
Real Sector currency depreciation, as well as demand-side factors
The economy experienced a substantial economic owing to large monetary accommodation in the past,
contraction in 2022 due to heightened macroeconom- inflation has moderated. Accordingly, as reflected
ic instabilities, particularly on the fiscal and external by two official consumer price indices, year-on-year
fronts. Lingering effects of the economic disturbances headline inflation has decelerated to single-digit levels
associated with the unprecedented economic crisis by July 2023, driven by the impact of tight monetary
in 2022 led to a further contraction in the economy as well as fiscal policy measures, softening of food and
during the first quarter of 2023, resulting in an 11.5 energy prices and the favourable statistical base effect.
percent, year-on-year, contraction in the first quarter Accordingly, year-on-year headline inflation based on
of 2023. Based on the high frequency indicators per- the Colombo Consumer Price Index (CCPI), deceler-
taining to economic activity, it is projected that the ated to 6.3 per cent in July 2023 (CCPI, 2021=100)
economy will experience only a modest contraction in from its peak level of 69.8 per cent recorded in Sep-
the second quarter of 2023. This will be on the back of tember 2022 (CCPI, 2013=100) and 57.2 per cent by
the Services sector which has shown steady progress end 2022 (CCPI, 2013=100). Following a similar trend,
with the pickup in tourism, and the Industry sector year-on-year headline inflation based on the National
which is also expected to recover during the second Consumer Price Index (NCPI) decelerated to 4.6 per-
half of the year, driven by the relaxation of import recent in July 2023 (NCPI, 2021=100) from a peak level
strictions and the moderation in inflation and easing of 73.7 percent in September 2022 (NCPI, 2013=100)
of monetary conditions. Although the current pro- and 59.2 percent by end 2022 (NCPI, 2013=100). Year-
longed period of dry weather may have some adverse on-year core inflation, which reflects underlying de-
effects on the Agriculture sector's performance in the mand pressures of the economy, also decelerated to
third quarter, these are not expected to be a signifi- single-digit levels. As indicated by the latest projec-
cant impediment to the overall growth momentum. tions, inflation will continue its disinflation path, and
With these developments, the economy is expected to is expected to stabilise at mid-single-digit level over
gather momentum from the latter part of 2023, sup- the medium term.
ported by the relaxation of monetary conditions and
improved supply chains. Fiscal Situation
Persistent structural budget deficits have been a
longstanding issue in the fiscal sector of Sri Lanka.
Since the recent economic crisis, the Government
embarked on a fiscal consolidation path alongside
the Extended Fund Facility (EFF) arrangement of
the International Monetary Fund (IMF), with the
aim of restoring fiscal sector sustainability, thereby
macroeconomic stability. Accordingly, Government
embarked on a comprehensive reform programme
through the implementation of array of revenue en-
hancement policy measures to increase both tax and
non-tax revenue, while continuing its drive to further
rationalise expenditure while taking measures to re-
structure public debt aimed at ensuring debt sustain- declined for the January to June period of 2023 by US
ability over the medium term. As result of such efforts, dollars 651 million and US dollars 1,868 million, re-
for the first half 2023, Government recorded a primary spectively. The merchandise trade deficit in this period
balance surplus owing to the increased revenue collec- of 2023 contracted to US dollars 2.3 billion from US
tion. However, with rising domestic interest expenses, dollars 3.5 billion compared to the deficit recorded in
the total growth in government expenditure negated the same period of 2022, owing to the lower import
the increased government revenue during the first expenditure in the first six months of 2023 in total.
half of 2023, leading to an expansion of overall bud- Although a significant share of import restrictions
get deficit. As per the Ministry of Finance, Economic has already been relaxed, demand for imports con-
Stabilization and National Policies, budget deficit is tinued to remain subdued, reflecting the tight financial
expected to narrow down to 8.0 per cent of GDP in conditions. Workers’ remittances and earnings from
2023, in comparison to 10.2 per cent of GDP recorded tourism grew significantly so far during the year. In the
in 2022, while the Government revenue and grants is financial account of the Balance of Payments (BOP),
expected to rise above 15 per cent of GDP by 2026 and net foreign investment inflows were recorded in the
a surplus in the primary balance is to be maintained
from 2024 onwards to ensure fiscal sector sustain-
ability in the medium term. Meantime, government
has engaged with the external debtors seeking for a
debt relief and have announced the Domestic Debt
Optimisation (DDO) program with the objective of
transforming the debt stock to a sustainable level as
per the targets envisaged in the IMF-EFF program.
External Sector Situation

After a tumultuous 2022, the external sector is
showing some notable improvements so far in 2023.
Export earnings remained above US dollars 1.0 billion
for the second consecutive month in June 2023, while
import expenditure declined compared to the previ- government securities market so far during the year.
ous month. Export earnings and import expenditure The rupee has recorded an appreciation of over 12.0
per cent so far during 2023 despite showing some vol-
atility in recent periods. The gross official reserve level
improved gradually to around US dollars 3.8 billion
by end July 2023, supported by some foreign inflows
along with sizable net foreign exchange purchases by
the Central Bank. Further improvements are likely in
the BOP in the remainder of the year mainly due to
the projected reduction of the trade deficit with an
expected decline in merchandise imports despite a
slowdown in exports. Meanwhile, both tourist arriv-
als and workers’ remittances are expected to record
notable improvements during 2023. Consequently,
the external current account deficit is expected to

reduce in 2023 in comparison to 2022. The outlook during 2023, while net foreign assets (NFA) of the
of the financial account will be primarily dependent banking system also witnessed a notable expansion
on the outcome of the debt restructuring process and during this period. Driven by these developments, the
the continuation of the IMF programme. A significant year-on-year growth of broad money (M2b) remains
improvement in financial flows may be possible with moderated at 6.4 percent by end July 2023.
the successful debt restructuring and continuation of
the IMF programme, particularly in terms of addition- Interest Rate Structure
al loans from bilateral and multilateral partners. Market interest rates, which recorded their highest
levels in 2022, started to decline gradually in 2023.
Monetary Situation The downward adjustment in market interest rates,
A notable slowing down in the expansion of broad despite the tight monetary policy stance that prevailed
money supply was observed in 2023 led by significant till mid-2023, was mainly due to the improved liquidi-
contraction in credit to the private sector. Due to the ty conditions, reduction in risk premia of government
lagged effect of tight monetary policy, monetary con- securities with more clarity on domestic debt opti-
ditions remained significantly tight causing outstand- misation, deceleration in inflation and the guidance
ing credit to the private sector to contract notably by provided to the market by the Central Bank. Further,
around Rs. 410 billion during the period from Janu- following the policy interest rate reductions on two
ary-May 2023. However, an expansion in outstanding occasions market interest rates continued to decline
credit to the private sector was observed thereafter at a faster pace. However, some downward rigidity in
amounting to a total of around Rs. 90 billion in June market lending interest rates was observed as against
and July 2023, mainly due to the valuation effects the reduction in deposit interest rates. Accordingly,
arising from the exchange rate depreciation and the to induce a swift reduction in overall market interest
overall easing of monetary conditions. However, a rates, particularly lending interest rates, the Central
sustained recovery in credit to the private sector is yet Bank announced targeted administrative measures in
to be observed. Meanwhile, credit to the State Owned August 2023, to reduce specific lending interest rates
Business Enterprises (SOBEs) by the banking system that are considered to be excessive as well as other
also contracted during the seven months ending July lending interest rates in line with the easy monetary
2023. However, net credit to the Government (NCG) policy stance.
by the banking system continued to expand thus far

Macroeconomic Vulnerability/Surveillance
Indicators (MSI)

Section 4
Articles

Green Banking Initiatives by

Bangladesh Bank
Abstract Financial sector is one of the major sources of
In the recent years, sustainable development and financing industrial projects such as steel, paper,
environmental safeguards have gained significant at- cement, chemicals, fertilizers, power, textiles, etc.,
tention worldwide. Financial institutions, through cause maximum carbon emission. Banks and finan-
their financing activities, play a crucial role in pro- cial institutions (FIs) hold a unique position in an
tecting environment. In this context, Bangladesh economic system that can affect production, busi-
Bank (BB) has taken proactive measures to promote ness, and other economic activities through their
green banking initiatives in the country. The green financing activities. Banks and FIs can play an inter-
banking initiatives of BB have yielded positively in mediary role between economic and social develop-
terms of promoting sustainable development and ment and environmental protection for promoting
environmental conservation. This article briefly re- environmentally sustainable and socially responsible
views the green banking initiatives taken by BB and investment. In this context, Bangladesh Bank (BB),
searches new policies to persuade financial institu- the central bank of Bangladesh, has been actively
tions for more environment friendly practices and involved in formulating and implementing various
develop a greener economy. It has been observed green banking initiatives to encourage banks and FIs
that a continued collaboration among regulators is to integrate environmental considerations into their
required to further strengthen green banking prac- operations.
tices in Bangladesh. This article explores the pioneering green banking
initiatives formulated and implemented by BB and
1. Introduction suggests policies to adopt environmentally friendly
Bangladesh is among the fastest-growing econ- practices and develop a greener economy. The work
omies in the world. Economic growth has been ac- is descriptive, based on secondary data from differ-
companied by large gains in poverty reduction and ent publications, circulars, and sustainability reports
human development. On the other hand, the country published by other institutions.
is also one of the worst affected vulnerable countries Green Banking Initiatives of Bangladesh Bank
of the world to natural disasters and climate change. BB has always been keen to incentivize green
The geographical location in a low-lying delta eco- banking and sustainable finance. It has issued com-
system makes the country exposed to several climate prehensive set of guidelines in order to protect en-
change-induced disasters. Besides, the country's eco- vironment. BB has also taken initiatives for estab-
system is under major threat as 60 percent of its lishing a dedicated green banking desk, mandatory
land mass is barely 5 meters above sea level. There reporting and disclosure of sustainability rating and
is a prediction that the country will experience about green rating for banks and FIs. BB's green banking
40cm (15 inches) of sea level rise by 2080. The Global initiatives broadly categorized into the following as-
Climate Change Risk Index 2021 ranks Bangladesh pects: policy initiatives, monitoring of sustainable/
seventh among the countries most affected by ex- green finance activities, sustainability rating and
treme weather (Germanwatch, 2021). green rating for banks and FIs, refinance support

from BB in diverse green products/sectors, and BB's 2. Policies and Regulations on Green Banking
initiatives for environmental management. Mean- BB formulated environmental risk management
while, the government's development plans includ- (ERM) guidelines for the first time in 2011 and green
ing the National Sustainable Development Strategy banking policy guidelines for banks in the same year.
(NSDS) 2010-2021, Perspective Plan of Bangladesh: In 2013, FIs were brought under green banking ac-
2010–2021, 8th Five-year Plan 2021-25, globally ad- tivities. In 2020, BB introduced a sustainable finance
opted Sustainable Development Goals (SDGs) etc. policy for banks and FIs. The chronological develop-
have given emphasis on flourishing green banking ments of green banking and sustainable finance ac-
activities. tivities by BB are highlighted in the following Table-1.

3. Sustainable Finance and Green Finance by which increased by 58 percent to Taka 1308 billion in
Banks and FIs 2022. The percentage of sustainable finance against
Sustainable Finance total loan disbursement also increased from 8.0 per-
Sustainable finance refers to the business con- cent in 2021 to 11.6 percent in 2022 (Chart 1). The
ducted in such areas and in such a manner that helps sector-wise amount and share of sustainable financ-
to overall reduction of external carbon emissions ing by banks and FIs in 2022 are given in Chart 2.
Green finance
Green finance is a part of ethical and sustainable
financing. It is a means of promoting environment
and resource conservation by reducing consump-
tion of resources (e.g., electricity, water, moving
and internal carbon footprint. It has a wider scope

of definition which includes green finance and sus-
tainable linked finance containing sustainable ag-
riculture, sustainable CMSME, socially responsible
finance (SRF), and other sustainable linked finance,
etc. Sustainable finance has gained popularity in the
country within a short period as both banks and FIs away from paper-based transactions, etc.) through
have become keen to embrace the business model its operations. It refers to banks’ lending to projects
that protects the environment from pollution. BB's that reduce negative externality or promote posi-
several initiatives also contributed to expanding the tive externality, thus endorsing or supporting green
use of sustainable finance. Total disbursement for initiatives. According to the 'green taxonomy' devel-
sustainable finance was Taka 825 billion in 2021, oped by BB, green finance can be classified into dif-

ferent categories such as renewable energy, energy lines on environmental and social risk management
efficiency, alternative energy, liquid waste manage- (ESRM). Following ESRM, banks and FIs disbursed an
ment, solid waste management, etc. The total amount amount of Taka 4372 billion to 162423 environmen-
of disbursement as green finance by banks and FIs tal risk rated projects in 2022. Green banking policy
increased significantly by 69 percent from Taka has also encouraged banks and FIs to utilize climate
72 billion in 2021 to Taka 122 billion in 2022. The risk funds and to follow environmental conservation
percentage of green finance against total term loan in business centers. The year-wise information on
disbursement was 5.0 percent in 2022 which was the utilization of climate risk funds, ESRR, and in-
3.1 percent in 2021. The year-wise amount of green house green banking activities by BB are shown in
finance and category-wise share of green finance are Table 2.
given in Chart 3 and Chart 4 respectively.
Other Green Banking Activities by Banks and FIs

Environmental and Social Risk Rating (ESRR)
is obligatory for banks and FIs in line with guide-
4. Sustainability Rating of Banks and FIs by BB non-bank financial institutions. The poor performers
Banks and FIs are going to be rated according to are disincentivized so that they are compelled to back
their performance on environmental, social, and gov- on track. The sustainability rating is being published
ernance attributes. Sustainability rating is defined once a year since 2021 following the sustainability
as the rating of the banks and FIs concerning their rating methodology issued on 31 December 2020.
performance in five major components namely (i)
sustainable finance, (ii) CSR, (iii) green refinance, 5. Refinance Schemes by BB for Enhancing Green
(iv) core banking sustainability, and (v) banking Finance
services coverage. Good performers having higher BB has introduced four refinance schemes to
rating scores are incentivized through BB's year-wise broaden green finance at a lower cost. These are:
recognition as one of the top ten banks and top five 1) Green Transformation Fund (GTF), 2) Refinance

Scheme for Green Products/Projects/Initiatives, 3) finance scheme funded by excess liquidity of Sha-
Refinance Scheme for Islamic Banks and Financial riah-based financial institutions to facilitate Shari-
Institutions for Investment in Green Products/Initia- ah-based banks and FIs was introduced in 2014. The
tives, and 4) Refinance Fund for Technology Develop- product range under this scheme is 51 which are
ment / Up gradation of Export Oriented Industries. segregated into 8 categories.
Green Transformation Fund (GTF): BB introduced Refinance Fund for Technology Development / Up
GTF, a long-term refinancing window, of USD 200 mil- gradation of Export Oriented Industries: In 2021, BB
lion in 2016. The size of the GTF has been enhanced initiated a new fund of Taka 10 billion, which offers
by adding Euro 200.0 million in 2020 and another refinance facilities for the modernization and tech-
$50 billion in local currency in 2022. The disburse- nological development or upgrade of export-oriented
ment from GTF up to 31 March 2023 was USD 140.9 industries. This fund facilitates 32 industrial sectors
million and Euro 71.2 million. mentioned in the Export Policy of Bangladesh for
Refinance Scheme for Green Products/Projects/ 2018–2021, under 11 initiatives/categories. The dis-
Initiatives: A revolving refinance widow of Taka 2.0 bursement from the scheme was Taka 865.67 million
billion was established by BB in 2009 for 55 green till 31 March 2023.
products/projects/initiatives under 9 green cate-
gories. Subsequently, the size of the fund has been 6. BB’s In-house Green Practice
increased to 4.0 billion, and the products line to 68 BB has taken several significant actions to im-
under 11 categories. Since inception on 31 March prove the technological, energy, and environmental
2023, a total of Taka 7423 million has been disbursed sustainability of its internal operational processes.
from the fund. The major steps taken by BB as its in-house green
Refinance Scheme for Islamic Banks and FIs: The practices are given in table 3.

7. Way forward References:

The adoption of green banking initiatives by BB is 1. Annual Report, various issues of Bangladesh
a significant step towards sustainable development Bank.
and environmental conservation. BB is continuous- 2. BANGLADESH CLIMATE FISCAL FRAME-
ly reviewing and updating green banking policies to WORK (March, 2021)-Ministry of Finance, Govern-
keep pace with emerging environmental challeng- ment of the People’s Republic of Bangladesh.
es. The following measures regarding green banking 3. Madhanagopal, D., & Momtaz, S. (2022)-Cli-
activities can advance Bangladesh even more in the mate change and risk in South and Southeast Asia:
days ahead. Socio political perspectives; Taylor & Francis.
• Developing innovative financial instruments 4. Population challenges for Bangladesh in the
to mobilize additional resources. Green financing coming decades. (2008, September). Pub Med Central
products like green bonds and green SUKUK have (PMC). https://www.ncbi.nlm.nih.gov/pmc/articles/
already been introduced in the country. More focus PMC2740702/
needs to be given to other globally used green fi- 5. Quarterly Review Report on Sustainable Fi-
nancing products such as venture capital, transition nance of Banks & Financial Institutions, Bangladesh
bonds, sustainability-linked bonds, green equity, Bank, (2022).
green securitization, green leasing, etc. to attract 6. Sustainable Finance Policy for Banks and Fi-
green finance in the country. nancial Institutions, Bangladesh Bank, 2020.
• Coordinated and sustained efforts among all
regulators and stakeholders’ i.e. Ministry of Finance, Keywords: Sustainable Development, Global climate
Department of Environment, other line ministries, change, Green policies, Greener Economy
BB, commercial banks, non-bank FIs, manufacturing Prepared By SAARCFINANCE Wing, BB.
industries, and end-user clients are required to reap
the full benefits of green finance.
• Investment in capacity building and aware-
ness rising are required to scale up green finance.
The academia and research institutions can play a
vital role in promoting green finance by developing
innovative solutions to a low-carbon economy.
• Strengthening assessment and disclosure of
climate and environmental risks in the financial and
real sectors; every bank and FI should publish an
annual sustainability report; and
• Incorporating agent banking and microfi-
nance institutions in green banking policies, and
developing an efficient green finance database.

The Currency Demand

Paradox in India
Introduction growth trend in India, which appears to be counter-
intuitive, giving rise to a currency paradox (Bailey,
Efficient payment and settlement systems foster
economic development, promote financial stability 2009). Further, Covid-19 has intensified this paradox
and support financial inclusion. India has emerged as the rising uncertainties increased cash demand,
over the years as the front runner of the payment despite accelerated migration to digital modes of
technologies. The Government of India and Reserve payments (Ardizzi et al., 2020). This phenomenon
Bank has encouraged greater use of electronic pay- is, however, not new, or unique to India and has been
ments so as to achieve a ‘less-cash’ society. Efforts observed for several nations.
are being directed to produce a robust payment sys- Against above backdrop, this article tries to exam-
tem that combines the attributes of safety, security, ine cash paradox of India, which is parallel growth of
enhanced convenience, accessibility, affordability, currency and digital payment modes, witnessed in
interoperability, and customer awareness and pro- recent years. The article covers broad trends in the
tection. In recent years, a concerted effort has been payment landscape, trends in currency demand in
made to develop state-of-the-art national payments India in the recent years and the factors underlying
infrastructure and technology platforms viz. Imme- the currency paradox.
diate Payments Service (IMPS), Unified Payments
Interface (UPI), Bharat Interface for Money (BHIM), Digital Payments: Broad Trends
Bharat Bill Pay System (BBPS), Aadhaar-enabled With the launching of the UPI for retail payments
Payment System (AePS) and Trade Receivables in 2016, the digital transactions have grown mark-
Discounting System (TReDs). Technology has been edly in India. Volume of the UPI transactions have
critical to the resilience of India in the face of the increased from around 43 crores to 7404 crores
Covid-19 pandemic. It has also been central to India’s within a span of 6 years from 2017 to 2022, record-
response to the crisis and in supporting the recovery. ing a compound annual growth rate (CAGR) of 135.9
Financial technologies particularly robust payment percent (Chart 1).
systems have played a key role in safeguarding the
financial system by ensuring seamless disbursal of
loans, access to financial markets, insurance, MSME
credit, pension services and direct benefit transfers.
The introduction of UPI has changed the retail
payments scenario in the country. The total volume
of retail electronic payments witnessed manifold in-
crease over the years. This robust growth of digital
payments is expected to reduce the cash transactions
and overall cash demand in the economy. However,
there is no evidence for this perceived substitutabil-
ity between currency and digital payment modes for
effecting transactions, rather it witnessed a parallel

Along with the volume, the value of UPI transac- it depicts that the people are more inclined to use
tions has also increased from ₹57 thousand crores digital mode of payments, especially for transaction
in 2017 to ₹12,595 thousand crores in 2022 with a purposes. As can be seen in Chart 4, there is a marked
CAGR of 145.9 percent (Chart 2). decrease in the cash withdrawal to digital payments
ratio over last few years.
On the wholesale payment side, Reserve Bank of In nutshell, it is evident that both the volume and
India’s Real Time Gross Settlement (RTGS)- a payment value of digital transactions have increased signifi-
system for large value- recorded a significant expan- cantly over the recent years in India.
sion in the volume of transactions from 1244 lakh in
2017 to 2426 lakh in 2022 with a CAGR of 11.8 percent The Currency Demand Paradox
(Chart 3). Currency in circulation-GDP (CiC-GDP) ratio has
risen steadily since 2017-18. After peaking in 2020-21
at 14.4 percent, CiC-GDP ratio is still higher in 2022-23
at 12.4 percent than the pre-pandemic level of 12.2
percent (Chart 5). Over the six years beginning from
2017-18, CAGR of currency in circulation has been
10.8 percent.
The changing trend towards the usage of alterna-

tive payment methods can be gauged from cash with-
drawal to digital payment ratio. Here, the proxy for
digital payments which have been taken is aggregate
of total value of card transactions (debit and credit
cards both) and UPI transactions which are the two The simultaneous expansion of both traditional
dominant digital payment methods being used for and digital currency methods within an economy
transaction purposes. Now, as this ratio goes down, seems puzzling, defying expectations of substitutabil-

ity of each other, and leading to what can be termed transformation. Illustratively, a counterfactual assess-
as currency demand paradox. Due to growing uncer- ment shows that the CiC-GDP ratio would have been
tainties, this paradox was exacerbated by the Covid-19 12 per cent in 2020-21 and 11.9 per cent in 2021-22
pandemic as people demanded cash primarily for relative to the actual ratio of 14.4 per cent and 13.4 per
precautionary motive while also resorting to digital cent, respectively, had it not been for the pandemic-in-
payment modes (Ardizzi et al., 2020). duced fall in the base (GDP) and uncertainty-driven
The persistent affinity for cash has been attribut- surge in currency levels.
ed to factors such as the decline in opportunity costs The empirical analysis conducted by the RBI Staff
of holding currency, i.e., interest rates, precautionary on the long-run currency demand function using
holdings amid uncertainty, presence of a large in- autoregressive distributed lag (ARDL) model, cov-
formal economy and direct benefit transfers (DBTs) ering the sample period from Q2:2009 to Q2:2022,
by the government, promoting both cash and digital provides some interesting perspectives. All variables
modes, as routing of benefits digitally tends to be fol- employed for empirical analysis, except interest rates,
lowed by cash withdrawals. have been converted to natural logarithm with sea-
Despite increasing overall cash demand, the share sonal adjustment for relevant variables. Appropriate
of small denomination banknotes (₹100 notes or of dummies were added to control for demonetisation
less denomination) in the total currency in circula- (Q4: 2016, Q1:2017) and the first Covid-induced na-
tion has gone down and share of high denomination tionwide lockdown (Q2:2020). As per the Augmented
banknotes have gone up steadily from 82.7 percent Dickey-Fuller (ADF) test, all variables are stationary
in 2017-18 to 91.6 percent in 2022-23 (Chart 6) . It at levels or first differences.
implies that that the cash is being increasingly used The baseline model indicates that nominal income
for precautionary motives which is especially true for (LYN) is the dominant driver of cash demand (LCIC)
the Covid-19 pandemic. The decline in the share of low (positive relationship), while short-term interest
denomination notes, partly due to the substitution of rates, proxied by deposits rates of major banks (INT),
small-value payments by the UPI and mobile wallets, have a negative association with currency usage (Ta-
is corroborated by their narrowing ticket sizes. ble 1). Further, access to digital modes, proxied by
digital payments value (LDIGVAL), tends to dampen
currency usage (models 2 and 3). The substitution
effect, albeit significant, is lower than the income ef-
fect, suggesting that digital transactions can offset the
impact of income on currency demand to lower the
currency-to-deposit ratio over time. The precaution-
ary effect on currency usage captured through the
economic policy uncertainty index (LEPU) [positive]
indicates a preference for cash during uncertain pe-
riods.
The assessment shows that the sudden uptick in
CiC growth during Covid-19 can be attributed to the
precautionary and store-of-value motives even as
the transactional use of cash has progressively been
Lower transactional cash demand was also evi- substituted by digital modes. Recent data suggests a
dent from the sharper decline in the number of cash turnaround in the pandemic-induced precautionary
withdrawals at ATMs than in the withdrawal values, demand for cash. Concurrently, digital payment modes
leading to increased withdrawal sizes. Given these continue to maintain strong growth momentum post-
factors, the trends in CiC-GDP ratio alone may not be Covid.
adequate to assess the efficacy of the ongoing digital

Conclusion References:
The assessment shows that the increase in cur- 1. Ardizzi, G., A. Nobili and G. Rocco (2020), ‘A
rency demand, particularly during Covid-19 can be Game Changer in Payment Habits: Evidence from Dai-
attributed to the precautionary and store-of-value mo- ly Data During a Pandemic’, Bank of Italy, Occasional
tives even as the transactional use of cash has progres- Paper No. 591.
sively been substituted by digital modes. Understand- 2. Bailey, A. (2009), ‘Banknotes in Circulation
ing the drivers of banknote circulation vis-à-vis digital – Still Rising. What does this Mean for the Future of
modes, is important for central bank core activities Cash?’ Keynote address at The Banknote Conference,
such as cash and liquidity management, retail pay- Washington DC, Vol. 6.
ment strategies and monetary policy (ECB). Central 3. Williams, J. C. (2012), ‘Cash Is Dead! Long Live
bank cash and liquidity management activities can be Cash!’ Federal Reserve Bank of San Francisco, Annual
improved by a good understanding of the demand for Report.
cash. It also throws light on the behavioral aspects of
the people in the case of payments. It is important to
examine in future whether this paradox will continue
in the post pandemic era too!

Sovereign Debt and External Sector

Vulnerabilities in South Asia Dr. S.P.YW. Senadheera Dr. V.D. Wickramarachchi
The Covid-19 pandemic resulted in a surge in sov- from macroeconomic imbalances in the pre-pandem-
ereign debt levels across the world, as many govern- ic period are faring worse than others.
ments were compelled to borrow heavily to scale-up Sri Lanka announced a debt standstill for select-
their emergency spending to protect lives and live- ed foreign debt service payments in April 2022 and
lihoods, amidst dwindling revenue collection. In the sought International Monetary Fund (IMF) assistance
ensuing recovery phase, the lingering effects of larg- through an Extended Fund Facility (EFF) for balance
er fiscal support and monetary policy easing have of payment and budgetary support while taking mea-
resulted in spill over effects on external sector and a
wave of high inflation in most emerging market and
less developed economies, heightening their risks
related to macroeconomic stability. Currently, the
global economy is coping with challenges emanating
from multitude of sources such as monetary policy
sures for restructuring of the public debt portfolio.

Meanwhile, Pakistan is also on the verge of a debt cri-
sis and has been able to avoid a default thus far with
the support of an IMF bailout package. Although the
risks of external and overall debt distress remain low
in Bangladesh, the country also obtained IMF assis-
tightening by the major central banks to rein in in- tance to address urgent balance of payment and fiscal
flation, elevated commodity prices, weak recovery in needs. Moreover, debt levels have soared in Maldives
Chinese economy, war in Ukraine, and concerns over and Bhutan and any delayed economic recovery could
cross border contagion of financial sector vulnera- hinder stabilisation of their debt to GDP ratios at low-
bilities in the United States. Consequently, emerging er levels.
and less developed economies are witnessing varied Many South Asian governments have limited fiscal
and asymmetric impact on their external and fiscal space to manoeuvre the economy through unantici-
sectors, manifested by widening current account pated shocks and they have little choice but to finance
imbalances and heightened sovereign debt unsus- their widening budget deficits through massive bor-
tainability issues. South Asia is no exception, and rowings during periods of economic shocks. Poor rev-
several SAARC countries which were already ailing enue collection and rigid government expenditure do
not leave much room for such governments to sup- foreseen economic shocks.
port their economies and people during economic Sovereign debt vulnerabilities of a country could be
headwinds. Sri Lanka, for example, had introduced amplified by the composition of the debt portfolio. The
a low tax regime in late 2019 with the aim of boost- countries which have a substantial share of foreign
ing economic activities and thereby increase govern- currency denominated debt, mostly owed to foreign
ment revenue, though realised results were far from creditors, face massive risks especially in the events
the expectation due to the deep economic contraction of sudden stops and capital flow reversals. Any ma-
caused by the unanticipated pandemic. The govern-
ment revenue as a percentage of GDP declined to the
historically lowest levels of 8.3 per cent and 8.2 per
cent in 2021 and 2022, respectively. With dwindling
foreign financing amidst sovereign credit rating down-
grades, the Sri Lankan government resorted to mone-
tary financing, which led to an escalation in inflation
to an unprecedented level and a sharp depreciation
of exchange rate in the post pandemic period. These
developments aggravated the country’s debt vulnera-
bilities further, spiralling into a debt crisis. In the case
of Pakistan, post pandemic recovery was stalled by the
devastating floods in 2022, requiring the government
jor setback in foreign currency earnings, such as the

limitations on tourism earnings during the pandemic
period, decline in remittances and slowdown in the
major export destinations, or the intensified outflows
due to inflationary spikes in global markets could be
detrimental for the highly leveraged countries with
sizable foreign exposure. Bunching of large debt ser-
vice payments amidst a crunch in foreign earnings
and meagre external reserves, could call for painful
current account adjustments through currency depre-
ciation or may erode investor confidence barring for-
eign financing avenues to rollover maturing debt and
further borrowings. This was evident in both crises in
to provide immediate relief for the affected popula- Sri Lanka and Pakistan in the recent times. Further, in
tion, adding more pressure on government budget. countries with high foreign currency debt exposures,
As the country grappled with consecutive economic the currency depreciation could substantially increase
shocks, the Pakistan government was compelled to the total debt valued in terms of domestic currencies,
seek assistance from the IMF once again in the form raising the overall debt to GDP ratio. Moreover, sov-
of a stand-by-arrangement, amidst impending large ereign debt vulnerabilities could vary depending on
foreign debt service payments, dwindled export earn- the terms and conditions of the debt obligations. For
ings and dried up foreign exchange reserves. Recent the countries with higher non-concessional loan ex-
global and country-specific crises have underscored posures, the debt service costs tend to be hefty. With
the importance of maintaining a healthy fiscal space Sri Lanka graduating from low income country to a
and sustainable debt levels during normal periods to lower middle income country, the access to conces-
build up resilience of the economy to withstand un- sional funding became limited and the government

was compelled to borrow from the global markets sector; to have floating exchange rates and buildup
at commercial rates to meet the country’s desired of foreign exchange reserves as buffers. South Asia
growth plans. These non-concessional borrowings also responded in similar lines, though the legacy
intensified the debt vulnerabilities in Sri Lanka due debt issues, weaker economic fundamentals, and less
to increased debt service costs. On the other hand, competitive export sectors hampered such efforts. As
debt to GDP ratio of Bhutan has soared in the recent many other countries in the world, none of the South
years, but the IMF has assessed the country’s debt Asian economies emerged unscathed by the Covid-19
levels to be less risky since major portion of Bhutan’s pandemic, but the external sectors of the countries
public and public guaranteed debt are comprising of with weak economic fundamentals and structural
loans obtained from the Government of India in rela- issues experienced worser economic turmoil than
tion to the construction of hydropower projects. Since others.
the Government of India is taking both financial and South Asia’s poor external sector performance
construction risks and is committed to purchase all stems mainly from meagre merchandise export per-
surplus electricity at a price reflecting the cost plus a formance. However, with the increasing per capita
profit margin, sovereign debt vulnerability of Bhutan income levels across the region, the demand for im-
is deemed to be lower than what is been reflected by ports is persistently on the rise. Higher GDP growth
the overall debt to GDP ratio (International Monetary rates, large fiscal deficits, and fast-growing investment
Fund, 2022) have contributed to the imports growth. The result-
Economic growth and real interest rates play a ing trade deficit has contributed to the persistently
key role in a country’s debt dynamics. Countries that high current account deficits creating pressure on
do not maintain a healthy growth momentum fail to the exchange rates. This has been worsened by unfa-
stabilise their debt at more manageable levels. For vourable and deteriorated terms of trade as a result of
example, Sri Lanka’s economic growth has slowed less sophistication and diversification of export goods
down since 2018, due to numerous domestic and portfolio. This is due to the dominance of predom-
global headwinds such as the constitutional crisis in inantly primary goods that are exported instead of
2018, Easter Sunday attacks in 2019, Covid-19 pan- industrial goods which invariably have greater value
demic in 2020-2021 and the debt crisis in 2022. This addition. However, South Asian countries possess vi-
led to a rapid growth in central government debt level brant service export sectors to showcase their com-
from 72.2 per cent of GDP in 2007 to 100.1 per cent of petitiveness. Another common strength of the South
GDP by end 2021 leading to a debt crisis in 2022. At Asian Economies is the robust and reliable inflow of
the same time, real interest cost of the debt portfolio worker remittances received from their diaspora liv-
tends to raise the overall debt burden and hence both ing in advanced economies. However, overreliance on
domestic and foreign market interest rates and infla- such remittances could lead to short term pressures
tion rates influence the debt trajectory of a country. in the forex markets, particularly in the eventuality
On the external front, South Asian economies large- of global distress such as Covid-19 pandemic. All in
ly escaped the reverberations of 1997 East Asian Crisis all, countries with larger trade gaps have weak shock
and 2008 Global Financial Crisis mainly due to their absorption capacity and benefit less from technology
feeble links to the outside regions through trade and transfers and Foreign Direct Investment (FDI) (World
investments and lack of integration of their financial Bank, 2019). This phenomenon is evident in most of
sectors with the global financial system. However, the South Asian economies.
trade and financial linkages of the South Asian coun- Although current account deficits are not necessar-
tries have strengthened over the years increasing ily evil, if left unaddressed, persistence of such deficits
their exposures to global headwinds. The 1997 crisis could evolve into distress in external debt. Unless the
taught many lessons to emerging market economies countries with higher levels of external debt bring the
and prompted the countries to have two main policy burden of debt servicing down to manageable levels,
responses to the crises stemming from the external a scenario of global financial distress that results in
capital outflows could aggravate the vulnerabilities in the global economy. South Asian economies have
arising from sharp currency depreciations. Further, also been opening up their doors progressively to
high external debt levels would hamper the access to portfolio investments increasing exposure to global
international capital markets due to higher risk pre- market volatilities. However, capital flows could pose
mia involved. On the FDI front, although there had a threat to the external sector stability of economies,
been a better record of FDI inflows in countries such especially those under fixed exchange rate regimes.
as India and Bangladesh in the recent years, the over- Exchange rate policy of the country also can exac-
all FDI to GDP ratios remain constant over the years erbate their external sector vulnerabilities. Although
for almost all South Asian countries, except Maldives, stable exchange rates are generally preferred by the
compelling the governments to rely on debt creating economic agents, intervention in the foreign exchange
foreign inflows. market is not the optimum strategy to stabilize the
exchange rate on a sustainable basis, especially in the
context of South Asia, in view of lack of sufficient buf-
fers in the form of Gross Official Reserves. Attempts to
maintain a relatively stable exchange rate amidst large
debt service payments and limited foreign inflows re-
sulted in Sri Lanka’s usable reserves plummeting to
dismal levels in the first half of 2022 and the foreign
currency liquidity crunch led to massive shortages in
imported essential goods, fuel and energy.
In the current context, the South Asian economies
will have to navigate through a challenging global eco-
nomic environment while addressing domestic struc-
tural issues that are the root-causes of external sector
Therefore, persistent current account deficits and and sovereign debt vulnerabilities. Volatile global fi-
resultant buildup of foreign debt portfolio have led nancial conditions, weakening demand in some trading
the economies to experience recurrent Balance of partners and surge in commodity prices could pose
Payment (BOP) crises, requiring countries such as Sri external sector challenges for South Asian nations in
Lanka and Pakistan to resort to assistance from the the period ahead. The advanced economies are envis-
aged to maintain a tighter monetary policy stance as
they fight against the surge in inflation, prior to the
expected easing from 2024 onwards. The South Asian
economies will have to cope with resulting higher glob-
al interest rates in the forthcoming period, which will
undermine the efforts to reduce borrowing costs. Nev-
ertheless, more anchored inflation expectations and
maintenance of flexible exchange rates would help mit-
igating negative spillovers to South Asian economies.
The growth impact of appreciation in advanced econ-
omy currencies will also be a concern, as an apprecia-
tion of the US dollar index by 10 percentage points is
estimated to be associated with a decline in real output
by 1.9 per cent in emerging markets, two quarters after
IMF multiple times. Portfolio investments, the main the initial appreciation (International Monetary Fund
contributor to the financial account, are generally , 2023). A slowdown in economic recovery could be
highly volatile and responsive to the developments challenging for South Asian countries that are more

reliant on high growth to stabilise their debt ratios. Sri more vigour. Measures will have to be taken to attract
Lanka is currently in the process of restructuring its non-debt creating flows such as FDI more while ne-
foreign debt portfolio as well as optimising its domes- gotiating with traditional and non-traditional trading
tic debt, which is envisaged to bring the overall debt partners for economic and trade cooperation to pro-
into a sustainable trajectory. Strong commitment of the vide a sustainable boost to exports. Structural predic-
government and other stakeholders of the economy aments to integrate further with global value chains
to forge ahead with the fiscal consolidation measures will have to be addressed through reforms to address
and economic reforms to resolve the debt distress on persistent trade deficits and resultant external sector
a sustainable basis. South Asian countries that are vulnerabilities.
facing some level of debt distress will also have to re-
sort to a fiscal consolidation path, through revenue References
enhancements measures while curtailing government International Monetary Fund. (2022). Bhutan:
expenditure through rationalisation and better target- 2022 Article IV Consultation-Press Release; Staff
ing. However, fiscal consolidation measures should be Report; and Statement by the Executive Director for
formulated with due consideration to their impact on Bhutan. International Monetary Fund. Asia and Pacific
growth and equity, to ensure economic revival is not Dept.
unduly delayed and vulnerable segments are not left International Monetary Fund. (2023). External Sec-
behind. On the external front, maintenance of exchange tor Report: External Rebalancing in Turbulent Times.
rate flexibility and buildup of reserves will be the main International Monetary Fund.
buffers to mitigate external sector vulnerabilities. The World Bank. (2019). South Asia Economic Focus:
South Asian economies will have to continue their ef- External Vulnerabilities. World Bank.
forts on liberalisation, both in capital and trade, with

Section 5
Box Items

Box: The future of digital

payments in Bangladesh
The future of digital payments in Bangladesh One of the ground breaking steps of the government
looks really promising. More and more people are towards digital Bangladesh is the interoperable dig-
getting access to digital payment platforms because ital transaction platform (IDTP) called "Binimoy",
of the increasing rate of internet and smart phone which enables the instant transfer of money from
usage. The government's focus on promoting digiti- one platform to another and vice versa within banks
zation also contributed to increase digital payments. and MFS operators. BB, in line with the government,
Additionally, the Covid-19 pandemic has accelerated has a vision to make 75 percent of total transaction
the growth of digital payments in Bangladesh. People cashless by 2027 . The introduction of Bangla QR
are now more inclined towards contactless transac-
tions and prefer using digital payment methods to
avoid physical contact.
In order to keeping up with the modern payment
system, BB developed various digital platforms like
Bangladesh Automated Clearing House (BACH),
Bangladesh Automated Cheque Processing Systems
(BACPS), Bangladesh Electronic Funds Transfer Net-
work (BEFTN), National Payment Switch Bangladesh
(NPSB) and Bangladesh Real Time Gross Settlement
(BD-RTGS), which played a significant role in making
digital payments more accepted among the popula-
tion under banking system. On the other hand, mo-
bile financial service (MFS), payment service pro-
viders (PSPs) and payment system operators (PSOs)
made the electronic payments handy and comfort-
able for the unbanked population. Fintech based
start-ups have been providing support for regulation Code enables small traders to make payments from
and the regulatory sandbox. Through all this sup- all banks and MFS accounts by just scanning the
port, a 360-degree financial ecosystem is ensured. Bangla QR apps installed on their mobile devices.
The transaction of digital payments also increased BB has taken initiative to issue license for ‘digital
significantly and stood at Taka 108 Trillion in FY23, bank’ and developed a guidelines in this regard. This
grew by 156.3 percent in four years during FY20-23. branchless virtual bank can give the banking system
The government of Bangladesh has a vision name- a mileage and momentum to reach the banking at
ly "Smart Bangladesh" which aims to transform the the last mile of the country. Digital bank shall offer
country into a knowledge-based society by 2041. The innovative digital financial products through online
government has formulated ‘Bangladesh’s National end-to-end tech-based digital ecosystem using AI,
Digital Payments Roadmap 2022-2025’ to bring the machine learning, block chain and other advance
whole nation under the umbrella of digital payments. technologies. It is restricted to issue any physical
instruments for transaction; rather it may issue vir- literacy, financial exclusion, fraud and cyber securi-
tual card, QR Code or any other technology-based ty risks etc. Hopefully, with the coordinated efforts
products for facilitating its customer transactions. It of banks, FIs and MFS and by using advance tech-
also can use the agents of conventional banks or MFS nologies Bangladesh will overcome the challenges
providers, network of existing ATM/CDM/CRM and and will successfully move toward digital payments.
MFS network instead of its own agents. All these ini- Biometric authentication such as fingerprint & facial
tiatives are now contributing to enhance digital pay- recognition, machine learning, block chain and oth-
ments, reduce costs, increase financial inclusion and er advance technologies of 4th Industrial Revolution
improve overall efficiency of financial transactions. (4IR) will likely be widely used for payments in days
However, there are some challenges of digital ahead.
payments in Bangladesh such as lack of financial
Estimation of Growth-Maximizing
Inflation for Bhutan: Threshold Inflation
Inflation targeting is increasingly becoming the (1985) concluded that 4 percent inflation is an
focus of macroeconomic policy program in devel- acceptable price range for India. The threshold in-
oping economies. This is due to price stability be- flation for the Indian economy was conceptualized
ing chosen as one of the most important monetary by Rangaran (1998) with the acceptable inflation
policy objectives. Therefore, understanding the rate estimated at 6 – 7 percent for the Reserve
true relationship between economic growth and Bank of India (RBI). A recent study by Deepak
price level is critical for policy making. Existing lit- Mohanty, A B Chakraborty et al. (2011) suggested
erature on inflation and economic growth indicates a 4 - 5.5 percent threshold inflation for India. Given
that there is non-linear relationship between infla- the importance of determining the appropriate
tion and GDP growth. It is widely recognized that range of inflation level even for pegged exchange
a higher inflation is harmful to economic growth rate regimes in developing economy, Tara Prasaad
and lower inflation supports growth. Higher price Bhusal and Sajana Silpakar (2011) estimated the
level brings uncertainty in the decision making of threshold inflation for Nepal at 6 percent, which is
economic agents such as household utility maximi- slightly higher than in India.
zation and profit maximization for producers. Similarly, it is also important to examine rela-
Empirical studies have found that existence tionship between inflation and growth in Bhutan.
of non-linear relationship between inflation and For instance, expansionary monetary and fiscal
economic growth varies from country to country policy is desirable to boost economic growth but
and changes over the period. Economic growth at the same time simultaneous increase in price
is positively correlated when inflation is below a level may not generate expected welfare gain in the
certain level and negatively thereafter, termed as economy. Higher inflation negatively and strongly
threshold level of inflation for economic growth. impact the lower income group, distorts market
The existence of non-linear relationship between pricing and financial assets valuation, and de-
growth and inflation was initially explored by grades policy credibility of central banks on price
Fischer (1993). The Chakarvarty Committee stability. Given the policy relevance on improving

the living standard of the people through enhanced trend and cluster analysis suggest negative effect
economic growth and price stability, finding the of inflation on economic growth. However, policy-
growth-maximizing level of inflation for Bhutan is makers are more interested in knowing the thresh-
essential. old level inflation above which inflation adversely
Bhutan witnessed an average of 7.62 percent affects growth. Therefore, threshold inflation for
inflation from lowest level at 1.8 percent in 1985 Bhutan is estimated using following methodology
to a of 18.0 percent in 1983. On the other hand, and models. The gross domestic product (GDP)
annual GDP growth was at an average of 7.58 at constant price, consumer price index (CPI) and
percent, ranging from a high of 28.7 percent high real investment annual data from 1980 to 2017 are
in 1987 to a low of1.4 percent in 1991. Till the used for estimating ordinary least square (OLS)
mid-1980s, volatility in inflation and econom- and quadratic equation model.
ic growth was due to large investment for the Non-linear OLS Model : Prior to model estimation,
first mega hydropower project . In some periods, all-time series variables are tested for stationarity using
trends depict episode of higher inflation and lower augmented Dickey-Fuller Unit Root test. All the growth
economic growth. As illustrated in Figure 1, in rates, including inflation are stationary at 1 percent and
early 1990s, with the structural shift in develop- 5 percent significance level respectively. The Granger
ment policy in India, higher inflationary pressure Causality test is applied to measure the causation or
in India impacted Bhutan with double digit level feedback relationship between inflation and economic
of inflation, averaging 11.6 percent and low eco- growth. The test shows that inflation causes or affects
nomic growth at 3.2 percent . On the contrary, economic growth while there is no causation or feedback
there has been co-existence of higher inflation and from GDP to inflation. Investment does not have signifi-
higher growth in late 1990s and in 2007-2009. In cant impact on GDP, however it jointly causes GDP in the
the recent past, despite lower inflation there has model. The test helps in model specification to choose
been slower economic growth. Given the historical the dependent and independent variables and helps in
relationship between inflation and growth, it is not finding the existence of relationship between inflation
straight forward to generalize and conceptualize a and economic growth. The ordinary least square thresh-
suitable threshold inflation for Bhutan. The direct old estimation model is represented as follows.
Chhukha hydropower project (CHP) has the electricity generating capacity of 336MW. The construction was initiated in 1975 and
completed in 1986.
India is Bhutan’s main trading partner; more than 90 percent of total trade was with India till 1990 and currently, three fourth of
Bhutan’s trade is with India. Moreover, since 1974, the Bhutan currency (the Ngultrum), has been pegged one-to-one with Indian Rupee.
As per the lag selection criteria, optimum lag for GDP is zero, one for inflation, three to four for the investment. The higher lag effects
of investment follow the development cycle of hydropower projects which takes a minimum of 2-3 years for construction activities to
pick up and takes another 3-5 years to complete for production.

The negative impact of inflation on growth increases

Where Y_t is the GDP growth rate, π_t is inflation, largely when inflation level crosses above 7.0 percent
I_t is investment growth rate, z_t is dummy variable for level. From the estimates, GDP growth maximizes when
one time high level of GDP growth during hydropower inflation is within the range of 4.5-6.5 percent and based
commissioning, π^* is threshold level of inflation, and on computed RSME, the threshold level of inflation is
D_t is the dummy variable defined as: 6.3% for Bhutan. The results also show that the both the
coefficients of inflation & threshold inflation (β_1 & β_2)
is not significant when threshold is 2.5% and below, im-
plying no significant relationship between inflation and
The parameter π^* represent the threshold infla- output growth. Similarly, when threshold level is 7.0%
tion level with the property that the relationship be- and above, estimated coefficient of inflation (β_1) on
tween inflation and economic growth is measured by output growth is not significant but threshold inflation
β_1 when inflation is lower than the assumed threshold has significant effect on growth, entailing an inflation of
and is equivalent to β_1+β_2 when inflation level is high- 7.0% and above is intolerable for growth. Contrary to
er than assumed threshold. growth theory, when inflation is used as a determinant
In order to estimate the growth maximizing inflation, of output growth, investment has no impact on output
equation (1) is run at threshold values of inflation vary- growth even though direction of impact is positive it is
ing from 2.5-8.5 percent, of ten equations selected re- statistically insignificant at various time lags. This could
sults are reported in the output table. The equation with be due to higher volatility and limited instantaneous
the minimum level of root mean square error (RMSE) is effect on output such as hydropower investment which
identified as threshold inflation. Except for the thresh- is lumpy and takes longer to realize investment returns.
old value 2.5 percent below and above 8.5 percent, there The dummy GDP was used mainly to adjust the outliers
is significant relationship between inflation and growth. in GDP growth and to fit model.

Quadratic Model indicating that inflation at 6.3% and below supports

Further to check the robustness of the estimated growth. On the other hand, when inflation is beyond
threshold inflation from OLS method, the quadratic 6.3%, inflation deteriorates growth prospects. The re-
equation model has been used. The following qua- sult also indicates that there is regime switching from
dratic equation is specified to estimate the threshold positive impact of inflation on growth when inflation
inflation. is up to 6.3% to negative when inflation marks above
6.3%. Therefore, estimated threshold inflation for
growth is at 6.3% for Bhutan. The given result is fur-
The threshold inflation is calculated from the es- ther tested when quadratic model estimates threshold
timated parameters from the model after having ful- inflation at 6.5%, very close to OLS estimate, only 0.03
filled following two conditions. percentage points above. This sensitivity test shows
results are robust and concludes threshold inflation
for Bhutan is within 6.3-6.5 percent.
The estimations suggest policy makers to cau-
The threshold inflation which is at a tiously take inflation level at maximum of 6.5% level
point where GDP growth maximize and deteriorates of inflation as red alert for economic growth while
after that point. The quadratic equation result has formulating macroeconomic policy, especially for
determined the threshold inflation of 6.49% as given monetary policy operation. The empirically estimated
in the Table. Therefore, as per the quadratic equation threshold inflation has important policy implication
for the Royal Monetary Authority of Bhutan for con-
ducting monetary policy while framing medium term-
Five Year Plan development for the Government. The
Authorities must ensure growth-supportive monetary
policy framework by containing inflation below 6.5%,
otherwise growth will be costlier.
Although inflation threshold and inflation target
are correlated, the latter is more towards policy ap-
plications to steer monetary policy tools to achieve it,
while inflation threshold is a level where growth-infla-
tion trade-off starts. Nonetheless, threshold inflation
will be valuable inputs for setting inflation target for
the monetary policy operations. Considering the time
lag of monetary policy transmission assessment and
to have adequate buffer to accommodate exogenous
model, output maximizes when inflation level is at shocks, inflation target must be set lower than the
6.49% and it negatively affects growth when inflation inflation threshold. At the same time it is very import-
marks higher than the estimated threshold level. ant to remain cautious in deducing policy implications
on basis of this model as there are several other fac-
Although the estimated inflation threshold is 0.2 tors that affect growth through different channels.
percentage points higher compared to 6.3% of OLS For instance, in the recent years, the accommodative
estimation, the results are within a narrow range from monetary policy program has limited impact on both
6.3-6.5 percent without much variation. Both models inflation and growth since inflationary pressure was
have estimated threshold inflation at a similar level, largely influenced by disinflation in the regional and
implying that the estimated results are robust. global market. At the same time, credit expansion only
The empirical results based on OLS method shows in few sectors was not able to boost investment and
that economic growth maximize at 6.3% inflation, growth.

Sovereign Green Bonds the Parties (COP26) at Glasgow in November 2021

which includes, achieving net zero emission by 2070,
reaching 500GW non-fossil energy capacity by 2030,
Green bonds represent a category of thematic achieving 50 percent of energy requirements met by
bonds where proceeds are exclusively used to finance renewable energy by 2030, reducing total projected
or re-finance new and/or existing projects that are carbon emissions by one billion tonnes from now to
expected to have a positive impact on the environment 2030 and reducing carbon intensity of economy by 45
and/or climate. The global market for sustainable percent by 2030 over 2005 levels.
finance has registered a considerable growth since
2014 mainly led by issuances of green bonds. As per
the data published (Climate Bonds Initiative, Novem- Lightweight Payment and Settlement Sys-
ber, 2022 ), cumulative green bond issuances as on tem (LPSS): A Bunker Equivalent in Pay-
September 30, 2022 have surpassed US$ 2.0 trillion,
which includes sovereign green bonds (SGrBs) issued ment Systems
by 26 sovereigns aggregating to US$ 230.9 billion. In-
dia joined league of these nations by issuing sovereign India has achieved remarkable progress in the
green bonds for the first time in the financial year adoption and use of payment technologies in recent
2022-23. years. Safety and security of various payment infra-
Consequent to the announcement in the Union structure is of paramount importance to India. The
Budget 2022-23, the Government of India, in consul- payment systems currently in place, such as Real
tation with the Reserve Bank, finalised the sovereign Time Gross Settlement (RTGS), National Electronic
green bond framework on the lines of International Funds Transfer (NEFT), Immediate Payment Service
Capital Markets Association’s (ICMA) green bond prin- (IMPS) and Unified Payment Interface (UPI), are de-
ciples. The external review conducted by the Centre signed to handle large volumes while ensuring sus-
for International Climate Research (CICERO) has rated tained availability and hence they are dependent on
India’s green bond framework as ‘medium green’ with complex wired networks backed by the advanced IT
‘good’ governance. The framework lists nine broad infrastructure. However, catastrophic events like nat-
categories of eligible green projects to fulfil various ural calamities and war have the potential to render
environmental objectives such as reducing green- these payment systems temporarily unavailable by
house gas emissions, encouraging energy efficiency, disrupting the underlying information and commu-
promoting climate adaptations and improving natural nication infrastructure.
ecosystems. The Government has constituted a ‘Green The Reserve Bank of India has conceptualised a
Finance Working Committee’ for the evaluation and light weight and portable payment system that will be
selection of various eligible green projects and other independent of conventional technologies and can be
relevant works related to the framework. The alloca- operated from anywhere by a bare minimum staff. It
tion and utilisation of proceeds from issuance of green is expected to operate on minimalistic hardware and
bonds would also be subject to audit. software and would be made active only on a need
The Reserve Bank of India issued India’s maid- basis. It would process transactions that are critical to
en Sovereign Green Bonds keeping total issuance ensure stability of the economy such as government
at ₹16,000 crore spread equally over two tranches and market related transactions. Such a light weight
of ₹8,000 crore each in January and February 2023, and portable payment system could ensure near zero
with each tranche having equal amount of 5-year and downtime of payment and settlement system in the
10-year tenor bonds. The auctions of both tranches country and keep the liquidity pipeline of the economy
of SGrB registered robust demand from the market alive and intact by facilitating uninterrupted function-
participants with average bid-to-cover ratio of 3.04 for ing of essential payment services like bulk payments,
the 5-yr SGrB and 3.93 for the 10-yr SGrB. The average interbank payments and provision of cash to partic-
cut-off yields for the 5-year and 10-year SGrBs were ipant institutions. Having such a resilient system is
4.26 bps and 3.53 bps, respectively, below the pre- also likely to act as a bunker equivalent in payment
vailing secondary market yields of the conventional systems and thereby enhance public confidence in
government securities of the respective tenors. digital payments and financial market infrastructure
The issuance of Sovereign Green Bonds is a part even during extreme conditions.
of achieving five nectar elements (Panchamrit) of
India’s climate action committed at Conference of

SAARCFINANCE
Coordinators/Alternate Coordinators
Ahmad Rahimi
Alternate Coordinator
Afghanistan
Luthfe Ara Begum Md Abdul Karim

Coordinator Alternate Coordinator
Bangladesh
Sonam Tobgye Ms Sonam Yangki

Bhutan

SAARCFINANCE
Smita Sharma Ajesh Palayi

India
Idham Hussain Mariyam Rashfa

Maldives
Dr. Dilli Ram Pokhrel SIDDHA RAJ Bhatta

Nepal

SAARCFINANCE
M. Farooq Arby Md. Asghar Khan

Pakistan
Chatura Kulawardena Dr. M M Janaka D Maheepala

Sri Lanka

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Contents

Chair’s Message Section 2: Seminars

SAARCFinance - 25 years at a Glance Section 3: Macro-Economic Trends

Governors Gallery Section 4: Articles

2 | SAARCFINANCE e-Newsletter - 2023

SAARC Secretary General’s

Esal Ruwan Weerakoon

4 | SAARCFINANCE e-Newsletter - 2023

On behalf of Da Afghanistan Bank, I take this opportunity

SAARCFINANCE e-Newsletter - 2023 | 5

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journey of unyielding commitment to regional mechanism, reinforcing their relevance in a dynamic

SAARCFINANCE e-Newsletter - 2023 | 13

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Delegates of 30th SAARCFINANCE Group Meeting held in Dhaka on 12 June, 2015.

22 | SAARCFINANCE e-Newsletter - 2023

SAARCFINANCE e-Newsletter - 2023 | 23

24 | SAARCFINANCE e-Newsletter - 2023

A.S. Jayawardena Dr. Tilak Rawal

Dr. Ishrat Husain Dr. Salehuddin Ahmed

Dr. Y.V. Reddy Dr. D. Subbarao

SAARCFINANCE e-Newsletter - 2023 | 25

Mr. Daw Tenzin

Dr. Fazeel Najeeb Dr. Yuba Raj Khatiwada

Mr. Ashraf Mahmood Wathra Mr. Arjuna Mahendran

Dr. Indrajit Coomaraswamy Mr. Fazle Kabir

Mr. Khalilullah Sediq Mr. Dasho Penjore

Mr. Shaktikanta Das Mr. Ali Hashim

SAARCFINANCE e-Newsletter - 2023 | 27

Mr. Maha Prasad Adhikari

Mr. Jameel Ahmad

28 | SAARCFINANCE e-Newsletter - 2023

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Meetings and Initiatives

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Excursion Trip, City Tour, and

35th SAARCFINANCE Coordinators'

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Saarcfinance database working group

40 | SAARCFINANCE e-Newsletter - 2023

Training Programmes RBI started inviting participation in 2021 from

SAARCFINANCE e-Newsletter - 2023 | 41

SAARC Payment Council

42 | SAARCFINANCE e-Newsletter - 2023

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