IMF Observes Early Signs of Economic Recovery in Nepal

The International Monetary Fund (IMF) has noted early signs of economic recovery in Nepal but emphasized the need for further efforts in certain areas. Following a visit to Nepal from September 11 to 22, led by IMF’s Resident Representative for Sri Lanka, Sarwat Jahan, the IMF team released a press statement reviewing Nepal's macroeconomic situation.

Early Signs of Economic Recovery:

• Increase in imports, improvement in tax collection, and rise in public investment.

• Improvement in credit expansion, reduction in inflation, and growth in foreign exchange reserves.

• Key factors include remittance inflows, the revival of tourism, and a reduction in the proportion of imports.

Steps Needed for Further Improvement:

• Strengthening Public Investment Implementation: Improving the implementation process to make investments more effective.

• Empowering Domestic Revenue Collection: Enhancing internal revenue collection to strengthen economic resources.

• Making Grant Distribution Efficient: Developing a streamlined and transparent grant system.

• Review of Commercial Banks' Loan Portfolios: The IMF had set a condition under the Extended Credit Facility (ECF) program to review the loan portfolios (CPR) of the 10 largest commercial banks in Nepal. Although the Nepal Rastra Bank (NRB) attempted to proceed with this, no company was deemed suitable for the economic and technical evaluation, leading to the process being canceled. The IMF emphasized the necessity of CPR for large banks and the importance of continuous monitoring of loan management and bad loans.

Reforming Savings and Credit Cooperatives: Prioritizing the resolution of issues within cooperative institutions.

• Amendment of Money Laundering Act: The amendment of the Money Laundering Act was seen as a positive step, with further reforms needed in the NRB Act.

• External Audit of the Central Bank: Amending the NRB Act to make audits more transparent.

During their stay in Nepal, the IMF team held discussions with Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, Governor of Nepal Rastra Bank Maha Prasad Adhikari, Vice Chairman of the National Planning Commission Dr. Shivaraj Adhikari, and other senior officials. The team also met with representatives of the private sector and development partners.

The IMF's press release acknowledges Nepal's significant efforts toward economic reform but stresses the need for further crucial initiatives in the coming days.