International Monetary Fund (IMF) has geared up for the fifth review of the Extended Credit Facility (ECF) programme. IMF staff team, led by Sarwat Jahan held a series of discussions with authorities during September 11-22, 2024. Rupa Duttagupta, Deputy Director of IMF for the Asia Pacific Department, had later joined the IMF staff team. Jahan and Duttagupta held meetings with Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, Governor of Nepal Rastra Bank Maha Prasad Adhikari, Vice Chairperson of National Planning Commission Shiva Raj Adhikari, senior government officials and heads of the private sector umbrella bodies among other stakeholders to discuss recent macroeconomic developments and the implementation of the Extended Credit Facility-supported programmes.
The statement of the IMF staff team has said that Nepal’s economy is showing early signs of recovery. “Incoming high-frequency data shows import growth is entering into positive territory, tax collections are improving, and public investment is picking up,” reads the statement, “Credit growth is recovering while remaining appropriately below nominal GDP growth. Inflation continued to decelerate to around 3.6% by mid-July, partially reflecting favourable commodity prices and weak demand. International reserves continued to rise, underpinned by robust remittances, recovering tourism and still subdued imports.”
Moreover, the staff team emphasised the importance of accelerating the reform momentum as a crucial step in guiding the economy toward sustainable, strong and inclusive economic growth. The statement highlighted that achieving these goals would necessitate enhancing public investment execution, further strengthening domestic revenue mobilisation, and ensuring the timely disbursement of Child Grants. Given the challenges of elevated non-performing loans and capital constraints faced by banks, the IMF staff team recommended continued vigilance, advocating for strengthened regulation and the completion of the loan portfolio review for the largest 10 banks.
“Addressing vulnerabilities among the savings and credit cooperatives remains a priority. The recent amendments to the Anti-Money Laundering Act are a welcome step,” said the statement, “Amending the Nepal Rastra Bank (NRB) Act, completion of NRB’s external audit and increasing public enterprise’s transparency will enhance governance and accountability. The Investment Facilitation Act will bolster Nepal’s investment climate.”
Further, the statement hailed the authorities’ ongoing efforts in meeting key commitments under the fund-supported programme. The performance under the programme will be formally assessed in the context of the fifth review of the programme.
