{
  "title": "IMF Executive Board Concludes 2020 Article IV Consultation with Nepal",
  "publication": "IMF News, April 6, 2020",
  "sourceUrl": "https://www.imf.org/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation",
  "canonical": "https://www.imf.org/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation",
  "overlayPath": "/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/index.md",
  "summary": "The 2020 Article IV Staff Report was prepared for the Executive Board’s consideration on March 17, 2020 on a lapse-of-time basis.",
  "publishDate": "2020-04-06",
  "sections": [
    {
      "heading": "Background and scope",
      "content": "- The 2020 Article IV Staff Report was prepared for the Executive Board’s consideration on March 17, 2020 on a lapse-of-time basis.\n- Report reflects discussions with Nepali authorities in Kathmandu during January 5-17, 2020 and is based on information available as of end-January 2020.\n- The report was prepared before COVID-19 became a global pandemic and therefore does not reflect the implications of those developments; the outbreak has greatly amplified uncertainty and downside risks around the outlook."
    },
    {
      "heading": "Recent macroeconomic performance",
      "content": "- Drivers of recent strong growth:\n  - Greater political stability.\n  - More reliable electricity supply and broader access.\n  - Reconstruction activity following the 2015 earthquakes.\n- FY2018/19 performance:\n  - Real GDP growth: 7.1 percent.\n  - Headline inflation (December 2019): 6.5 percent.\n  - Current account deficit: 7.7 percent of GDP.\n  - Central government deficit: 4.6 percent of GDP.\n- Early FY2019/20 developments:\n  - Remittances decelerated due to slowing in remittance-sending economies, including India.\n  - Weaker agricultural performance.\n  - Current account deficit narrowed in the first months of FY2019/20 due to lower imports of fuel and construction materials.\n  - Gross official reserves: US$8.7 billion in December 2019, equal to 6.9 months of prospective imports.\n  - Credit growth: 14.8 percent (y/y) in December 2019 versus 25.4 percent (y/y) a year earlier."
    },
    {
      "heading": "Executive Board assessment — outlook and risks",
      "content": "- Growth outlook:\n  - FY2019/20 growth expected to ease to 6 percent.\n  - Reasons cited: slower growth in India, sluggish remittance inflows, weaker agricultural production.\n- Inflation outlook:\n  - Inflation expected at 6 percent due to high food inflation.\n- External and financial risks:\n  - Narrowing of the current account deficit and stabilization of gross official reserves observed amid moderating growth.\n  - Credit growth moderated from very high levels, but credit as a share of GDP remains elevated relative to peers.\n  - Downside risks include renewed balance of payments pressures and increased financial-sector risks if credit growth accelerates sharply or remittances slow abruptly.\n  - Nepal’s external position in FY2018/19 assessed as weaker than the level consistent with fundamentals and desirable policy settings."
    },
    {
      "heading": "Policy recommendations and priorities",
      "content": "- Financial-sector and macroprudential policy:\n  - Continue measures to prevent excessive credit growth and contain financial-sector risks.\n  - Maintain macroprudential measures implemented by the NRB.\n  - Continue strengthening bank supervision and regulation; actions already taken include a supervisory information system and implementation of selected elements of the Basel III capital framework.\n  - Recent regulatory requirement for banks to cross-check corporate borrowers’ financial information against the ITS expected to improve risk assessment.\n  - Activation of the countercyclical capital buffer requiring banks to increase capital by July 2020 is appropriate.\n  - NRB should closely monitor asset quality and concentration risk.\n- Fiscal policy and fiscal federalism:\n  - Fiscal policy should be geared to containing external pressures and protecting fiscal sustainability.\n  - A fiscal deficit of 4.5 percent of GDP, similar to FY2018/19 outcome, would be prudent.\n  - Continue upgrades to tax administration; adopt a top-down budget process and MTFF based on conservative revenue and expenditure assumptions to instill prioritization and avoid unrealistic revenue expectations among SNGs.\n  - Manage the transition to fiscal federalism carefully: align SNG overall expenditure envelope with available funding, impose tight limits on subnational borrowing, establish robust reporting and monitoring for SNGs, and clearly delineate roles and responsibilities across government levels.\n- Monetary policy and central bank governance:\n  - Strengthen monetary policy implementation through a well-functioning interest rate framework to reduce short-term interest rate volatility.\n  - Introduce a standing deposit facility as a first step toward establishing a reliable interest rate corridor implementation track record.\n  - Modernize NRB governance to improve autonomy and accountability: strengthen independent oversight, safeguard institutional and personal autonomy, enhance internal controls and external audit quality, and underpin reforms with supportive human resource management.\n- Structural reforms to boost growth:\n  - Encourage high-quality investment projects, in particular FDI.\n  - Ensure an enabling implementation environment for infrastructure projects and FDI as post-earthquake reconstruction spending declines.\n  - Focus on adequate staffing, better skills matching, and aligning incentives across government ministries responsible for project approvals, implementation, and monitoring."
    },
    {
      "heading": "Key statistics and projections (selected from Table 1)",
      "content": "- Real GDP (annual percent change):\n  - 2016/17: 8.2\n  - 2017/18: 6.7\n  - 2018/19: 7.1\n  - 2019/20 (Est.): 6.0\n  - 2020/21 (Projections): 5.7\n  - 2021/22 (Projections): 5.5\n  - 2022/23 (Projections): 5.4\n  - 2023/24 (Projections): 5.3\n- Headline CPI (period average):\n  - 2016/17: 4.5\n  - 2017/18: 4.1\n  - 2018/19: 4.6\n  - 2019/20: 5.9\n  - 2020/21: 5.8\n  - 2021/22: 5.6\n- Central government fiscal indicators (in percent of GDP):\n  - Total revenue and grants: 2016/17: 24.1; 2017/18: 25.3; 2018/19: 26.0; 2019/20: 25.8; 2020/21: 25.5; 2021/22: 25.6\n  - Tax revenue (selected years): 2016/17: 20.7; 2017/18: 21.1; 2018/19: 21.9; 2019/20: 21.8; 2020/21: 21.6; 2021/22: 21.4; 2022/23: 21.3\n  - Expenditure: 2016/17: 27.2; 2017/18: 31.9; 2018/19: 30.6; 2019/20: 30.4; 2020/21: 30.0; 2021/22: 29.7; 2022/23: 29.4; 2023/24: 29.3\n  - Net lending/borrowing: 2016/17: -3.1; 2017/18: -6.7; 2018/19: -4.6; 2019/20: -4.5; 2020/21: -4.4; 2021/22: -4.2; 2022/23: -4.1; 2023/24: -3.9; 2024/25: -3.7\n- Money and credit (annual percent change):\n  - Broad money: 2016/17: 15.5; 2017/18: 15.8; 2018/19: 13.2; 2019/20: 11.9; 2020/21: 11.6; 2021/22: 11.1; 2022/23: 10.9; 2023/24: 10.7\n  - Domestic credit: 2016/17: 20.2; 2017/18: 26.1; 2018/19: 21.7; 2019/20: 17.6; 2020/21: 15.7; 2021/22: 14.3; 2022/23: 13.8; 2023/24: 13.3; 2024/25: 13.1\n  - Private sector credit: 2016/17: 18.0; 2017/18: 22.3; 2018/19: 19.1; 2019/20: 15.0; 2020/21: 12.5; 2021/22: 12.2; 2022/23: 12.0\n- Saving and Investment (in percent of nominal GDP):\n  - Gross investment: 2016/17: 45.2; 2017/18: 55.2; 2018/19: 62.3; 2019/20: 54.6; 2020/21: 53.4; 2021/22: 52.4; 2022/23: 51.5; 2023/24: 50.6; 2024/25: 49.8\n- Balance of Payments (current account in millions of U.S. dollars and percent of GDP):\n  - Current account (US$ millions): 2016/17: -93; 2017/18: -2,350; 2018/19: -2,369; 2019/20: -1,760; 2020/21: -1,832; 2021/22: -1,963; 2022/23: -2,104; 2023/24: -2,215; 2024/25: -2,323\n  - Current account (in percent of GDP): 2016/17: -0.4; 2017/18: -8.1; 2018/19: -7.7; 2019/20: -5.2; 2020/21: -4.9; 2021/22: -4.8; 2022/23: -4.7\n- Trade balance (US$ millions and percent of GDP):\n  - Trade balance (US$ millions): 2016/17: -8,446; 2017/18: -10,849; 2018/19: -11,373; 2019/20: -11,658; 2020/21: -12,379; 2021/22: -13,140; 2022/23: -13,956; 2023/24: -14,770; 2024/25: -15,643\n  - Trade balance (in percent of GDP): 2016/17: -33.5; 2017/18: -37.4; 2018/19: -37.1; 2019/20: -34.2; 2020/21: -33.1; 2021/22: -32.2; 2022/23: -31.4; 2023/24: -30.5; 2024/25: -29.6\n- Workers' remittances (US$ millions):\n  - 2016/17: 6,556\n  - 2017/18: 7,224\n  - 2018/19: 7,769\n  - 2019/20: 8,402\n  - 2020/21: 8,825\n  - 2021/22: 9,270\n  - 2022/23: 9,737\n  - 2023/24: 10,227\n  - 2024/25: 10,742\n- Gross official reserves (US$ millions):\n  - 2016/17: 9,264\n  - 2017/18: 9,304\n  - 2018/19: 8,545\n  - 2019/20: 8,536\n  - 2020/21: 8,419\n  - 2021/22: 8,233\n  - 2022/23: 8,045\n  - 2023/24: 7,850\n  - 2024/25: 7,673\n  - In months of prospective imports: 2016/17: 8.3; 2017/18: 7.9; 2018/19: 6.6; 2019/20: 5.1\n- Public debt (in percent of GDP):\n  - 2016/17: 30.2\n  - 2017/18: 30.1\n  - 2018/19: 33.7\n  - 2019/20: 35.7\n  - 2020/21: 37.4\n  - 2021/22: 39.0\n  - 2022/23: 40.3\n  - 2023/24: 41.1\n- Nominal GDP (in billions of U.S. dollars):\n  - 2016/17: 25.2\n  - 2017/18: 29.0\n  - 2018/19: 30.7\n  - 2019/20: 34.1\n  - 2020/21: 40.8\n  - 2021/22: 44.5\n  - 2022/23: 48.4\n  - 2023/24: 52.9\n- Private Sector Credit (in percent of GDP):\n  - 2016/17: 74.7\n  - 2017/18: 80.6\n  - 2018/19: 84.0\n  - 2019/20: 86.0\n  - 2020/21: 87.5\n  - 2021/22: 88.2\n  - 2022/23: 88.9\n  - 2023/24: 89.8\n  - 2024/25: 90.2\n- Exchange rate (NPR/US$; period average):\n  - 2016/17: 106.2\n  - 2017/18: 104.4\n  - 2018/19: 112.9\n\nSources: Nepalese authorities; and IMF staff estimates and projections. Data as of January 31, 2020.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- India and the IMF\n- Nepal and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/index.md)",
    "[Structured JSON version](/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/index.json)",
    "[Bundle manifest](/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/bundle-manifest.json)",
    "Published: April 6, 2020",
    "The 2020 Article IV Staff Report was prepared for the Executive Board’s consideration on March 17, 2020 on a lapse-of-time basis.",
    "Report reflects discussions with Nepali authorities in Kathmandu during January 5-17, 2020 and is based on information available as of end-January 2020.",
    "The report was prepared before COVID-19 became a global pandemic and therefore does not reflect the implications of those developments; the outbreak has greatly amplified uncertainty and downside risks around the outlook.",
    "Drivers of recent strong growth:",
    "FY2018/19 performance:",
    "Early FY2019/20 developments:",
    "Growth outlook:",
    "Inflation outlook:",
    "External and financial risks:",
    "Financial-sector and macroprudential policy:",
    "Fiscal policy and fiscal federalism:",
    "Monetary policy and central bank governance:",
    "Structural reforms to boost growth:",
    "Real GDP (annual percent change):",
    "Headline CPI (period average):",
    "Central government fiscal indicators (in percent of GDP):",
    "Money and credit (annual percent change):",
    "Saving and Investment (in percent of nominal GDP):",
    "Balance of Payments (current account in millions of U.S. dollars and percent of GDP):",
    "Trade balance (US$ millions and percent of GDP):",
    "Workers' remittances (US$ millions):",
    "Gross official reserves (US$ millions):",
    "Public debt (in percent of GDP):",
    "Nominal GDP (in billions of U.S. dollars):",
    "Private Sector Credit (in percent of GDP):",
    "Exchange rate (NPR/US$; period average):",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[India and the IMF](http://www.imf.org/external/country/IND/index.htm)",
    "[Nepal and the IMF](http://www.imf.org/external/country/NPL/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/index.md",
    "json": "/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/index.json",
    "bundleManifest": "/en/news/articles/2020/04/06/pr20136-nepal-imf-executive-board-concludes-2020-article-iv-consultation/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-25T23:34:16.682Z"
}