In November 2003, the Executive Board of the International Monetary Fund approved a three-year Poverty Reduction and Growth Facility (PRGF) program in support of the10th Plan/Poverty Reduction Strategy Paper (PRSP) of His Majesty's Government of Nepal (HMGN). The loan totals approximately US$70 million on concessional terms ¹ and is to disbursed in seven equal tranches over 2003-2006. The first tranche of $10 million was disbursed last November. A second tranche of $10 million is expected to be disbursed later this fiscal year as HMGN continues to implement reforms committed in the 10th Plan and supported by the PRGF (these have been made public by HMGN on the IMF website: www.imf.org).

An IMF mission headed by Mr. Hisanobu Shishido visited Nepal during March 2-15 to review performance over the first six months of the PRGF program, and discuss HMGN's economic reform plans for 2004/05. The mission found that there had been good progress against the background of a difficult political and security situation. Pending the completion of a few outstanding actions, the second disbursement of the PRGF could thus be considered by the IMF Board sometime in May, 2004. The main findings of the mission are:

Achievements to date

• Macroeconomic performance in 2003/04 is in line with program objectives. All the macroeconomic targets for January 2004 have been met. Agriculture and manufacturing have done well despite the insurgency, and there has been a rebound in tourist arrivals. For the year as a whole, real GDP growth is now expected to exceed 3½ percent. Consumer price inflation is projected to remain at around 4¾ percent on average. Although the trade deficit has widened, robust remittances have kept international reserves at comfortable levels.
• The fiscal program is largely on track. Revenue and regular spending have been in line with the budget targets. However, development spending has been lower due in part to security problems. HMGN is making efforts to improve project implementation, and, as a result, development spending is expected to rise in the second half of the year.