Nepal Stabilizes Its Economy—and Sets Its Sights Higher

IMF News, August 19, 2026

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Published: August 19, 2026

Overview

Nepal completed its first IMF-supported arrangement in nearly two decades, implementing a concerted reform effort that secured macroeconomic stability after years of shocks.
The reform effort began in 2022 and was carried out despite government transitions, natural disasters, and global shocks.
The IMF mission chief interviewed: Sarwat Jahan.

Key achievements and indicators

Inflation fell from an average of 7.7 percent in fiscal year 2022-23 to 1.7 percent in the first half of fiscal year 2025-26.
International reserves rose from about nine months of import cover to more than twelve months of import cover.
Public finances improved: the primary fiscal deficit is lower and the budget gap narrowed sharply; debt is kept at low risk of distress.
Institutional improvements included a consistent policy anchor, program tailoring to the political situation, and strong capacity development support.

Shocks that tested the economy

Major earthquake in 2023.
Severe floods in 2024.
Social unrest in 2025 (referred to as "last year" from August 19, 2026).
Higher energy prices linked to the war in the Middle East more recently.
Combined effects: interrupted recovery and weighed heavily on job creation.

Institutional and policy reforms with lasting impact

Modernization of how the central bank conducts monetary policy.
Improved oversight of the financial sector, including stronger bank supervision and a review of loan quality.
Increased fiscal transparency by publishing financial statements of state-owned enterprises.
Development of a strategy to mobilize revenues.
Strengthened public investment planning and management.
Governance improvements: upgraded anti-money-laundering law and moves to strengthen the central bank's legal framework and accountability.
These reforms aim to improve the quality of economic policymaking and the effectiveness of macroeconomic policies over time.

Remaining priorities and policy recommendations

Foster higher private investment and generate more job creation to achieve growth that reaches ordinary people.
Strengthen the financial sector, including addressing vulnerabilities in savings and credit cooperatives that serve many people.
Continue deeper institutional reforms and maintain reform momentum.
Address governance gaps and rebuild public trust; authorities have begun an IMF Governance and Corruption Diagnostic.
Improve social protection and create conditions for stronger, more inclusive growth.
Maintain stability as the foundation for further growth and resilience-building ahead of future shocks.

Outlook and IMF partnership

Completing the IMF-supported program is an important milestone, but reforms will continue.
If reforms continue, Nepal will be well placed to raise living standards, create job opportunities, and withstand future shocks.
The IMF will remain a steadfast partner as Nepal pursues those goals.

IMF Country Focus, August 19, 2026 — Nepal Stabilizes Its Economy—and Sets Its Sights Higher. The Nepal team includes Sarwat Jahan, Arpitha Bykere, Melih Firat, Yaroslav Hul, Rekha Ghimire, Pranav Gupta, Paul Leonovich, Saraswti Sharma, Galen Sher, and Yichen Xu.