IMF: Mid term outlook of Nepal will depends on reform efforts of authorities

Kathmandu October 30- In the wake of the devastating earthquakes of April and May, the International Monetary Fund (IMF) has said Nepal’s medium-term outlook depends importantly on the authorities’ reform efforts. In the IMF’s South Asia Regional Update launched yesterday, the Fund has said the fiscal policy should accommodate stepped-up efforts to implement post-earthquake reconstruction spending.

“Monetary policy should focus on supporting the exchange rate peg and containing inflation. Ongoing efforts to mitigate financial sector risks amplified by the earthquakes should be intensified.”Stating that experience in other fragile countries shows that natural disasters can have permanent adverse effects on potential growth, IMF has stressed on the need for ambitious macroeconomic and structural policies.

The Fund has projected the country’s economic growth will stand at 4.4 per cent next year, as against 3.4 per cent this year. However, it has warned the outlook is subject to considerable downside risk. This is in view of the fact that ‘the recent promulgation of the constitution led to protests in Nepal’s southern lowlands and disruptions to trade routes to and from the southern border, causing fuel shortages and dampening economic activity’.

As a result also of the earthquakes in April and May, the country’s real GDP growth had decelerated to 3.4 per cent in 2014-15 (mid-July, 2014 to mid-July, 2015). Source: THT