The International Monetary Fund (IMF) has agreed to release the remaining US$ 43.2 million, marking the completion of Nepal’s Extended Credit Facility (ECF) arrangement.
An IMF delegation led by Sarwat Jahan visited Kathmandu from February 6–20, 2026. During the visit, IMF staff and Nepali authorities held discussions for the 2026 Article IV consultation and reached a staff-level agreement on the policy measures and reforms required to complete the seventh review under the ECF program, according to an IMF press release.
The fund stated that the final disbursement is subject to approval by the IMF Executive Board. Once approved, Nepal will gain access to SDR 31.32 million (approximately US$ 43.2 million). This will bring total financial assistance disbursed under the ECF to SDR 282.42 million (around US$ 384.4 million).
However, the IMF expressed concern over Nepal’s slowing economic growth following the Gen Z protests and rising vulnerabilities in the financial sector. Protest-related damage and ongoing economic uncertainty have dampened private sector confidence and delayed investment decisions. Economic growth for fiscal year 2025/26 is projected at between 3 and 3.5 percent.
The IMF noted that growth is expected to moderate amid uncertainty, weak private sector sentiment, and slow implementation of public capital projects. It emphasized that a peaceful political transition—supported by measures to accelerate capital spending, strengthen the financial sector, and improve governance—would help lay the groundwork for stronger, more sustainable, and inclusive growth.
Despite domestic challenges, Nepal has continued implementing reforms under the ECF-supported program. Key milestones achieved during the seventh review include the adoption of a Customs Compliance Improvement Strategy, completion of onsite inspections under the Loan Portfolio Review (LPR), and alignment of asset classification regulations with the Basel Committee on Banking Supervision (BCBS) guidelines.
Financial sector risks have intensified, with non-performing loans (NPLs) rising to 5.4 percent as of January 2026. The figure may be revised upward following the completed LPR, potentially affecting banks’ capital positions. The IMF also identified the submission of amendments to the Nepal Rastra Bank Act to Parliament as a critical reform measure under the program.
