{
  "title": "Nepal: Staff Report for the 2014 Article IV Consultation",
  "publication": "IMF Staff Country Reports, July 18, 2014",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2016/12/31/nepal-staff-report-for-the-2014-article-iv-consultation-41761",
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  "summary": "KEY ISSUES Context: Successful elections for a new Constituent Assembly and formation of a new government have stabilized the political situation. Macroeconomic situation and outlook: Nepal’s macroeconomic situation remains broadly favorable.",
  "sections": [
    {
      "heading": "Key issues and context",
      "content": "- Context: Successful elections for a new Constituent Assembly and formation of a new government have stabilized the political situation.\n- Subject areas: Balance of payments, Credit, External debt, Inflation, Monetary base, Money, Prices, Public debt, Remittances.\n- Keywords: authority, capital budget execution, CR, Credit, debt, Global, IFC work, Inflation, ISCR, monetary management, prefix, remittance inflow, Remittances, reserve money growth, South Asia, staff analysis, transmission mechanism."
    },
    {
      "heading": "Macroeconomic situation and outlook",
      "content": "- Current assessment: Nepal’s macroeconomic situation remains broadly favorable.\n- Growth: Growth is projected to recover in 2013/14 owing to good monsoons, robust growth in services, and increased public spending.\n- Inflation: Inflation is moderating, in line with developments in India.\n- External position: High remittance inflows are supporting a strong external position, as well as high reserve money growth.\n- Risks: Risks to the outlook are slightly tilted to the downside, involving slower-than-expected growth in countries hosting Nepali workers and domestic financial sector risks."
    },
    {
      "heading": "Medium-term prospects",
      "content": "- Remittances: Remittances are expected to continue to support the external position.\n- Growth drivers: Outlook for growth depends on improving the environment for private investment.\n- Public investment and reforms: This requires a decisive boost in public capital spending, and structural reforms in key areas."
    },
    {
      "heading": "Financial sector assessment",
      "content": "- FSAP findings: The recent assessment under the FSAP, Nepal’s first, raised concerns about asset quality and interconnectedness, as well as financial sector infrastructure—including the legal framework—and supervision and crisis preparedness.\n- Cooperatives sector: A largely unsupervised cooperatives sector is growing rapidly.\n- Vulnerabilities: Despite progress, significant vulnerabilities remain."
    },
    {
      "heading": "Key policy recommendations",
      "content": "- Monetary policy:\n  - Aim at controlling the volatility and level of excess reserves in the financial system.\n  - Implication: a modest tightening of monetary conditions.\n- Exchange rate policy:\n  - The exchange rate peg to the Indian rupee provides a useful nominal anchor for the economy.\n  - Assessment: the real exchange rate is broadly in line with fundamentals.\n- Fiscal and structural policy:\n  - Capital spending needs to be boosted to provide key infrastructure.\n  - Implement reforms to support private investment to generate sustained economic growth and employment opportunities.\n- Financial sector reform:\n  - Further reforms to bolster regulation and supervision, and improve financial infrastructure are needed to reduce risk and increase access to finance.\n\n---\n\n Content in this bundle\n\n- Cr14214\n  - Cr14214 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Cr14214 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: July 18, 2014",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781498386784.002",
    "Context: Successful elections for a new Constituent Assembly and formation of a new government have stabilized the political situation.",
    "Subject areas: Balance of payments, Credit, External debt, Inflation, Monetary base, Money, Prices, Public debt, Remittances.",
    "Keywords: authority, capital budget execution, CR, Credit, debt, Global, IFC work, Inflation, ISCR, monetary management, prefix, remittance inflow, Remittances, reserve money growth, South Asia, staff analysis, transmission mechanism.",
    "Current assessment: Nepal’s macroeconomic situation remains broadly favorable.",
    "Growth: Growth is projected to recover in 2013/14 owing to good monsoons, robust growth in services, and increased public spending.",
    "External position: High remittance inflows are supporting a strong external position, as well as high reserve money growth.",
    "Risks: Risks to the outlook are slightly tilted to the downside, involving slower-than-expected growth in countries hosting Nepali workers and domestic financial sector risks.",
    "Growth drivers: Outlook for growth depends on improving the environment for private investment.",
    "Public investment and reforms: This requires a decisive boost in public capital spending, and structural reforms in key areas.",
    "FSAP findings: The recent assessment under the FSAP, Nepal’s first, raised concerns about asset quality and interconnectedness, as well as financial sector infrastructure—including the legal framework—and supervision and crisis preparedness.",
    "Cooperatives sector: A largely unsupervised cooperatives sector is growing rapidly.",
    "Vulnerabilities: Despite progress, significant vulnerabilities remain.",
    "Monetary policy:",
    "Exchange rate policy:",
    "Fiscal and structural policy:",
    "Financial sector reform:",
    "**Cr14214**"
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