Nepal: Sixth Review Under the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Nepal
October 6, 2025
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Nepal has, so far, been relatively insulated from recent global trade and
aid-related disruptions given its small export sector. Economic activity has continued to
gradually recover, underpinned by a rebound in construction and manufacturing,
continued expansion of hydropower, and a good harvest that helped offset the impact
of the September 2024 floods. Growth in FY2024/25 is estimated to reach 4.3 percent,
although still below potential. Inflation is expected to remain within the Nepal Rastra
Bank’s target of about 5 percent. The external position has strengthened, with robust
growth in exports, remittances, and tourism outpacing the recovery in imports. Despite
improved growth, non-performing loans have continued to rise, eroding bank capital.
The financial health of the savings and credit cooperatives remains challenging.
aid-related disruptions given its small export sector. Economic activity has continued to
gradually recover, underpinned by a rebound in construction and manufacturing,
continued expansion of hydropower, and a good harvest that helped offset the impact
of the September 2024 floods. Growth in FY2024/25 is estimated to reach 4.3 percent,
although still below potential. Inflation is expected to remain within the Nepal Rastra
Bank’s target of about 5 percent. The external position has strengthened, with robust
growth in exports, remittances, and tourism outpacing the recovery in imports. Despite
improved growth, non-performing loans have continued to rise, eroding bank capital.
The financial health of the savings and credit cooperatives remains challenging.
Subject: Credit, Debt sustainability analysis, Expenditure, External debt, Money, Public debt, Revenue administration
Keywords: Asia and Pacific Department, coalition government, Credit, Debt sustainability analysis, downside risk, ECF-supported program, Global, investor confidence, loan portfolio review, reform agenda, staff appraisal, supplementary letter of intent, youth employment
Pages:
124
Volume:
2025
DOI:
Issue:
285
Series:
Country Report No. 2025/285
Stock No:
1NPLEA2025002
ISBN:
9798229026901
ISSN:
1934-7685
