IMF Staff Concludes Visit to Nepal

IMF News, September 23, 2024

Source details

IMF staff visit to Kathmandu conducted during September 11-22, 2024.
Staff team led by Ms. Sarwat Jahan.
Visit focused on recent macroeconomic developments and implementation of the Extended Credit Facility (ECF)-supported program.
Mission will not result in a Board discussion; views expressed are those of IMF staff.
Press Release No. 24/339 dated September 23, 2024.

Nepal’s economy is showing early signs of recovery.
Incoming high-frequency data indicate:
- Import growth is entering into positive territory.
- Tax collections are improving.
- Public investment is picking up.
Credit growth is recovering while remaining appropriately below nominal GDP growth.
Inflation continued to decelerate to around 3.6 percent by mid-July, partially reflecting favorable commodity prices and weak demand.
International reserves continued to rise, underpinned by:
- Robust remittances,
- Recovering tourism,
- Still subdued imports.

Banks are dealing with elevated non-performing loans and capital constraints; continued vigilance is necessary.
Recommended actions for the banking sector:
- Continue to strengthen regulation.
- Complete the loan portfolio review of the largest 10 banks.
Addressing vulnerabilities among the savings and credit cooperatives remains a priority.
Governance and transparency measures highlighted:
- Recent amendments to the Anti-Money Laundering Act are a welcome step.
- Amending the Nepal Rastra Bank (NRB) Act is recommended.
- Completion of NRB’s external audit is recommended.
- Increasing public enterprises’ transparency will enhance governance and accountability.
- The Investment Facilitation Act will bolster Nepal’s investment climate.

Accelerating reform momentum is critical to put the economy on a path towards sustainable, strong, and inclusive economic growth.
Key reform priorities identified:
- Enhancing public investment execution.
- Further strengthening domestic revenue mobilization.
- Prompt disbursement of Child Grants.
Authorities’ ongoing efforts in meeting key commitments under the Fund-supported program, with IMF technical assistance, are welcome.
Performance under the program will be formally assessed in the context of the fifth review of the program.

IMF team held meetings with:
- Honorable Deputy Prime Minister and Minister of Finance Mr. Bishnu Prasad Paudel.
- Nepal Rastra Bank Governor Mr. Maha Prasad Adhikari.
- National Planning Commission Vice-Chairman Dr. Shiva Raj Adhikari.
- Other senior government and central bank officials.
- Representatives from the private sector and development partners.
Ms. Duttagupta, Deputy Director in the IMF’s Asia and Pacific Department, attended key meetings.
IMF team expressed gratitude to the Nepali authorities for their warm hospitality and for constructive discussions.

Source: IMF Press Release No. 24/339 — IMF Staff Concludes Visit to Nepal (September 23, 2024).