IMF says Nepal’s economy is recovering

An International Monetary Fund (IMF) staff team, led by Sarwat Jahan, conducted a staff visit to Kathmandu during September 11-22, 2024, to discuss recent macroeconomic developments and the implementation of the Extended Credit Facility (ECF)-supported program .

At the conclusion of the visit, Jahan, issuing a press statement, said that Nepal’s economy is showing early signs of recovery.

Incoming high-frequency data shows import growth is entering into positive territory, tax collections are improving, and public investment is picking up. Credit growth is recovering while remaining appropriately below nominal GDP growth. Inflation continued to decelerate to around 3.6 percent by mid-July, partially reflecting favorable commodity prices and weak demand. International reserves continued to rise, underpinned by robust remittances, recovering tourism, and still subdued imports.

“Accelerating the reform momentum is critical to put the economy on a path towards sustainable, strong, and inclusive economic growth. This will require enhancing public investment execution, further strengthening of domestic revenue mobilization, and prompt disbursement of Child Grants. As banks deal with elevated non-performing loans and capital constraints, continued vigilance is necessary, including by continuing to strengthen regulation and completing the loan portfolio review of the largest 10 banks. Addressing vulnerabilities among the savings and credit cooperatives remains a priority. The recent amendments to the Anti-Money Laundering Act are a welcome step. Amending the Nepal Rastra Bank (NRB) Act, completion of NRB’s external audit and increasing public enterprise’s transparency will enhance governance and accountability. The Investment Facilitation Act will bolster Nepal’s investment climate.

“The authorities’ ongoing efforts in meeting key commitments under the Fund-supported program, with the support of IMF’s technical assistance, are welcome. Performance under the program will be formally assessed in the context of the fifth review of the program.

“The IMF team held meetings with the Honorable Deputy Prime Minister and Minister of Finance Mr. Bishnu Prasad Paudel, the Nepal Rastra Bank Governor Mr. Maha Prasad Adhikari, the National Planning Commission Vice-Chairman Dr. Shiva Raj Adhikari, and other senior government and central bank officials. The IMF team also met with representatives from the private sector and development partners. Ms. Duttagupta, Deputy Director in the IMF’s Asia and Pacific Department, attended key meetings. “The IMF team is grateful to the Nepali authorities for their warm hospitality and for constructive discussions.”