Kathmandu, June 11
An International Monetary Fund (IMF) team led by Sarwat Jahan has concluded a two-week mission to Nepal, culminating in a staff-level agreement with Nepali authorities on policies and reforms under the sixth review of the Extended Credit Facility (ECF).
The agreement, which is still subject to approval by the IMF Executive Board, would grant Nepal access to SDR 31.4 million (approximately US$42.7 million). This would bring the total disbursement under the ECF to SDR 251.1 million (around US$331.8 million) out of a total approved package of SDR 282.4 million.
According to a statement released by IMF, Nepal has made satisfactory progress under the ECF-supported program, meeting all but one of the quantitative performance criteria for mid-January 2025. Reforms related to tax expenditure reporting, the National Project Bank guidelines, and a post-loan portfolio review (LPR) roadmap are either completed or nearing completion. The Nepal Rastra Bank (NRB) is also advancing on key recommendations related to the IMF’s 2021 Safeguard Assessment and 2023 Financial Sector Stability Report.
However, the IMF has emphasized that the completion of the sixth review hinges on further progress with NRB’s loan portfolio review, including the selection of an independent international consultant.
On the economic front, Nepal is seeing a gradual recovery driven by gains in construction, manufacturing, hydropower expansion, and a good harvest, which helped offset the adverse effects of the 2024 floods. Economic growth for FY2024/25 is projected to exceed 4 percent, while inflation has eased to 3.4 percent as of April 2025. The external sector has also strengthened due to robust export growth, remittance inflows, and rising tourism revenues.
Nevertheless, financial sector vulnerabilities persist. Non-performing loans have increased to 5.2 percent, affecting bank capital, and the condition of savings and credit cooperatives (SACCOs) remains concerning.
Looking ahead, the IMF expects growth to strengthen in FY2025/26, with inflation remaining within the NRB’s tolerance band. Risks remain, including low capital project execution, increased financial sector stress, global trade uncertainties, and possible disruptions in domestic policy continuity.
The IMF also welcomed Nepal’s FY2025/26 budget, which aligns with the program’s objectives of fiscal sustainability and includes measures to boost capital spending, support private sector investment, and expand the school midday meal program.
The mission also held consultations with senior officials, including Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, National Planning Commission Vice-Chair Shiva Raj Adhikari, and NRB Governor Biswo Nath Poudel, as well as stakeholders from the private sector and development partners.
The IMF team expressed appreciation for the warm hospitality and constructive engagement of the Nepali authorities.
