Nepal's economy is showing initial signs of recovery, an official of the International Monetary Fund (IMF) said following a recent visit to Nepal.
Issuing a statement after concluding a visit to Nepal from September 11 to 22, the IMF team led by Sarwat Jahan highlighted encouraging data showing improvements across various sectors in Nepal. The IMF team visited Nepal to review recent economic trends and the progress of the Extended Credit Facility (ECF) provided to the country.
The statement added that imports are beginning to grow, tax revenue is increasing, and public investments are on the rise.
According to the IMF team, credit growth is also recovering, though it remains below nominal GDP growth—an appropriate level for the current economic climate. Inflation has eased to around 3.6% by mid-July, aided by favorable commodity prices and low domestic demand. Meanwhile, international reserves have strengthened due to robust remittance inflows, a recovering tourism sector, and lower import levels, the IMF stated.
“Accelerating reform efforts is crucial to sustaining strong and inclusive growth,” Jahan noted. She emphasized the importance of increasing public investment, enhancing domestic revenue collection, and ensuring the timely distribution of child grants. Jahan also pointed out the need for continued vigilance in the banking sector, particularly as banks address challenges like high non-performing loans and capital shortages. She recommended continued regulatory strengthening and the completion of loan portfolio reviews for the country’s ten largest banks.
Jahan added that addressing vulnerabilities in savings and credit cooperatives remains a key priority. The IMF team acknowledged the recent amendments to the Anti-Money Laundering Act as a positive development. Further reforms, including amending the Nepal Rastra Bank (NRB) Act, completing NRB's external audit, and improving transparency in public enterprises, would enhance governance and accountability, the IMF added. According to Jahan, the recently introduced Investment Facilitation Act is expected to further improve Nepal's investment climate.
The IMF welcomed the government’s progress in meeting key targets under the ECF program, supported by IMF technical assistance. The program’s performance will be formally reviewed during the upcoming fifth assessment.
During the visit, the IMF team met with Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, NRB Governor Maha Prasad Adhikari, National Planning Commission Vice-Chairman Dr. Shiva Raj Adhikari, and other senior government and central bank officials. The team also held discussions with private sector representatives and development partners.
The IMF also expressed gratitude to the Nepalese authorities for their warm hospitality and constructive discussions during the visit. -- RSS