## Nepal: IMF Reaches Staff-level Agreement on 5th Review Under the Extended Credit Facility _IMF News, January 21, 2025_ ## Source details **Canonical URL:** [Nepal: IMF Reaches Staff-level Agreement on 5th Review Under the Extended Credit Facility](https://www.imf.org/en/news/articles/2025/01/21/pr-25009-nepal-imf-reaches-agreement-on-5th-review-under-the-ecf) ## Other formats - [Markdown version](/en/news/articles/2025/01/21/pr-25009-nepal-imf-reaches-agreement-on-5th-review-under-the-ecf/index.md) - [Structured JSON version](/en/news/articles/2025/01/21/pr-25009-nepal-imf-reaches-agreement-on-5th-review-under-the-ecf/index.json) - [Bundle manifest](/en/news/articles/2025/01/21/pr-25009-nepal-imf-reaches-agreement-on-5th-review-under-the-ecf/bundle-manifest.json) ## Bibliographic details - Published: January 21, 2025 --- ### Mission and procedural status - IMF team led by Ms. Sarwat Jahan visited Kathmandu during Jan 8 to Jan 19, 2025. - Press Release No. 25/009 dated January 21, 2025. - Staff-level agreement reached for the fifth review of Nepal’s economic reform program under the IMF’s Extended Credit Facility (ECF); agreement is subject to approval by the IMF Executive Board. - Upon completion of the Executive Board Review, Nepal would have access to SDR 31.4 million (about US$40.6 million). - Total IMF financial support disbursed under the ECF would be SDR 219.7 million (about US$283.9 million), from a total of SDR 282.42 million. ### Recent program implementation and structural reforms - Program performance described as satisfactory. - All quantitative performance criteria and indicative targets for end-July 2024 were met except for the indicative targets on revenue collection and child welfare grants. - Implementation of structural benchmarks due before end-December 2024 gained momentum; some reforms remain ongoing. - Key reforms accomplished as part of the fifth review include: - Amendment of Nepal’s anti-money laundering (AML) law. - Strengthening the financial oversight of public enterprises. - Completing an audit of the FY2023/24 financial statement of the Nepal Rastra Bank (NRB) involving experts with international experience in auditing other central banks. - Loan Portfolio Review (LPR) of the 10 largest banks: - Initial procurement for the LPR was cancelled. - NRB restarted the process to hire an independent international consultant to assist with the LPR. - Completion of the review by the IMF’s Executive Board requires progress in key steps for launching the LPR and maintaining reform momentum. ### Economic developments and outlook - Recent shocks and impacts: - Severe floods in September 2024 caused widespread damage across critical sectors and dampened still-weak domestic demand. - Inflation accelerated to 6.1 percent in December 2024 due to a spike in food prices following the floods. - External and fiscal developments: - Nepal’s external position continued to strengthen, bolstered by robust remittances and subdued imports. - Revenue growth remained modest. - Financial sector vulnerabilities: - Non-performing loans in the banking sector reached 4.4 percent in October 2024. - Financial health of the savings and credit cooperatives (SACCOs) sector deteriorated. - Growth and near-term trajectory: - Growth is expected to gather pace, exceeding 4 percent in FY2024/25, supported by stronger public capital expenditure, including post-flood recovery and reconstruction efforts. - Imports are expected to rebound in the second half of the year. - Flood-driven food inflation is expected to ease as transport networks are repaired and agricultural output recovers. - Downside risks highlighted: - Under-execution of growth-enhancing capital projects. - An increase in financial sector vulnerabilities. - Potential disruption to policy continuity and reform implementation. ### Policy analysis and IMF recommendations - Fiscal policy: - Growth-friendly fiscal consolidation is critical—by accelerating capital expenditure coupled with stronger revenue mobilization. - Timely execution of spending will further support growth and recovery. - Monetary policy: - Monetary policy should continue to follow a data-driven approach to maintain price and external stability while supporting growth. - Financial sector and oversight: - With amendments to the AML Law enacted, the next steps should focus on the effectiveness and application of the new legal framework. - Amendments of the NRB Act are key to strengthening the central bank’s independence and governance. - Rising financial sector vulnerabilities warrant increased vigilance. - It is essential to launch the LPR in a timely manner; an important component would be to apply the Basel Committee on Banking Supervision Guidelines. - Prioritizing measures to deal with problematic SACCOs would help boost consumption. ### Stakeholder engagement - The IMF team met with: - Honorable Deputy Prime Minister and Finance Minister Mr. Bishnu Prasad Paudel. - National Planning Commission Vice-Chairman Honorable Dr. Shiva Raj Adhikari. - Nepal Rastra Bank Governor Mr. Maha Prasad Adhikari. - Other senior government and central bank officials, private sector representatives, and development partners. - IMF statement: “The IMF team is grateful to the Nepali authorities for their hospitality and for open and constructive discussions.” *Source: International Monetary Fund — Press Release No. 25/009, January 21, 2025.* --- ## References - [Nepal and the IMF](http://www.imf.org/external/country/NPL/index.htm) - [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [see Press Release No. 22/6](https://www.imf.org/en/News/Articles/2022/01/13/pr2206-nepal-imf-executive-board-approves-us-million-ecf-arrangement) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2025/01/21/pr-25009-nepal-imf-reaches-agreement-on-5th-review-under-the-ecf_