Press Release No. 13/41

Press Release No.13/41
February 8, 2013

An IMF staff team led by Mr. Todd Schneider visited Kathmandu during February 3-8, 2013, to assess macroeconomic developments since the Article IV consultation. (The staff report for the 2012 consultation is available at www.imf.org/nepal; see also Public Information Notice No. 12/138.) The mission held discussions with Finance Minister Pun, Nepal Rastra Bank Governor Khatiwada, National Planning Commission Vice Chairman Kshetry, Finance Secretary Subedi, and other senior government officials. The mission also met with development partners and private sector representatives.

At the conclusion of the visit, Mr. Todd Schneider, the IMF mission chief for Nepal, issued the following statement in Kathmandu:

“Nepal’s economic growth performance has weakened since the IMF annual Article IV consultation last November, owing both to external factors and to domestic considerations. Nepal’s trade partners, particularly India, are growing more slowly than was expected at that time. Agricultural output has weakened due to the delayed monsoon. Domestic factors are also important, particularly the uncertainty related to the budget, which has contributed to significant under-execution of spending plans thus far in Fiscal Year 2012/13. Lack of clarity about the legal status of spending appropriations in the current year budget means the government is likely to register a significant surplus in 2012/13. This tight fiscal stance is unfortunate as it will depress an already-slowing economy.

“Inflation remains stubbornly high, while the external current account surplus has diminished. Nepal’s trade deficit is rising, as imports have risen and exports declined (in dollar terms) during the first five months of the year. Remittance flows from Nepalese citizens working abroad continue to increase, but at a slower pace. These flows have bolstered household incomes, but also served to finance imports of nondurable consumer goods.

“The mission urged the authorities to take steps to accelerate high quality spending, both for poverty-alleviation and public capital investment. Adoption of a full year budget ordinance for 2012/13 would be welcome even at this late stage of the fiscal year. Equally important, the mission recommended early approval of a budget ordinance for 2013/14 to facilitate planning by line ministries and avoid another year of budget delay.

“The next Article IV consultation mission is expected to take place during the second half of 2013. In the meantime, IMF staff will remain closely engaged with the Nepalese authorities, including in the context of several technical assistance and training activities.”