IMF Staff Country Reports

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.