Nepal Stabilizes Its Economy—and Sets Its Sights Higher
IMF News, August 19, 2026
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Bibliographic details
- Published: August 19, 2026
Program achievements and headline outcomes
- Macroeconomic stability secured after years of shocks; IMF-supported arrangement completed (first in nearly two decades).
- 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, the budget gap narrowed sharply, and debt is kept at low risk of distress.
- Institutional improvements: modernization of central bank monetary policy conduct and improved financial sector oversight.
Key shocks that tested the recovery
- Major earthquake in 2023.
- Severe floods in 2024.
- Social unrest "last year."
- Higher energy prices linked to the war in the Middle East.
- Combined effect: interrupted the recovery and weighed heavily on job creation.
Durable reforms implemented
- Central bank: modernized monetary policy conduct; moves to strengthen the central bank's legal framework and accountability.
- Financial sector: stronger bank supervision; review of loan quality; recognition of vulnerabilities in savings and credit cooperatives.
- Fiscal transparency and management: published financial statements of state-owned enterprises; developed a strategy to mobilize revenues; strengthened public investment planning and management.
- Governance and compliance: upgraded anti-money-laundering law.
- Reforms sustained despite government transitions, natural disasters, and global shocks through a consistent policy anchor and capacity development support.
Remaining priorities and policy recommendations
- Foster higher private investment and generate more jobs creation to achieve stronger, more inclusive growth.
- Continue to strengthen the financial sector, with particular attention to savings and credit cooperatives that serve many people.
- Deepen institutional reforms and maintain reform momentum to address governance gaps and rebuild public trust.
- Strengthen social protection and create conditions for stronger, more inclusive growth.
- Continue the IMF Governance and Corruption Diagnostic as part of efforts to address governance gaps.
Outlook and IMF partnership
- Stability is framed as the foundation for growth, not the finish line.
- 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 these goals.
Nepal team mentioned
- Sarwat Jahan, Arpitha Bykere, Melih Firat, Yaroslav Hul, Rekha Ghimire, Pranav Gupta, Paul Leonovich, Saraswti Sharma, Galen Sher, and Yichen Xu.
IMF NEWS, August 19, 2026.