Nepal’s economy is showing early signs of recovery, according to an official from the International Monetary Fund (IMF) following a recent staff visit to the country. Led by Ms. Sarwat Jahan, the IMF team visited Kathmandu from September 11 to 22, 2024, to discuss recent macroeconomic developments and the implementation of the Extended Credit Facility (ECF)-supported program.
Jahan highlighted that recent high-frequency data indicates a positive trend in import growth, improved tax collections, and an uptick in public investment. Credit growth is recovering, remaining appropriately below nominal GDP growth, while inflation has decelerated to around 3.6% by mid-July, driven in part by favorable commodity prices and subdued demand. Additionally, international reserves have been rising due to robust remittances, recovering tourism, and still low imports.
“Accelerating the reform momentum is critical to ensure sustainable, strong, and inclusive economic growth,” Jahan emphasized. She noted the need to enhance public investment execution, strengthen domestic revenue mobilization, and ensure the prompt disbursement of Child Grants. With banks facing elevated non-performing loans and capital constraints, it is essential to maintain vigilance, including strengthening regulations and completing the loan portfolio review of the largest banks.
Addressing vulnerabilities within savings and credit cooperatives is also a priority. Recent amendments to the Anti-Money Laundering Act are a positive step, and further amendments to the Nepal Rastra Bank (NRB) Act, completion of NRB’s external audit, and increased transparency for public enterprises will enhance governance and accountability. The Investment Facilitation Act is expected to improve Nepal’s investment climate.
The IMF official commended the authorities for their ongoing efforts to meet key commitments under the Fund-supported program, supported by IMF technical assistance. Performance under the program will be formally assessed during the fifth review.
During the visit, the IMF team met with Deputy Prime Minister and Minister of Finance Bishnu Prasad Paudel, NRB Governor Maha Prasad Adhikari, National Planning Commission Vice-Chairman Dr. Shiva Raj Adhikari, and other senior officials, as well as representatives from the private sector and development partners.
“The IMF team is grateful to the Nepali authorities for their warm hospitality and constructive discussions,” Jahan concluded.
