"Nepal has made good progess in implmentation of ECF"

KATHMANDU, JULY 14: On July 9, 2024, the Executive Board of the International Monetary Fund (IMF) completed the fourth review under the four‑year Extended Credit Facility (ECF) for Nepal, allowing the authorities to withdraw the equivalent of SDR 31.4 million (about US$ 41.3 million). This brings total disbursements under the ECF for budget support thus far to SDR 188.3 million (about US$ 247.7 million).

According to a press communique posted by the IMF on its official site www.imf.org, the ECF arrangement for Nepal was approved by the Executive Board on January 12, 2022, for SDR 282.42 million (180 per cent of the quota or about US$ 371.6 million).

"Nepal has made good progress with the implementation of the program, which has helped mitigate the impact of the pandemic and global shocks on economic activity, protect vulnerable groups, and preserve macroeconomic and financial stability. The program is also helping to catalyze additional financing from Nepal’s development partners".

The economy continues to face challenges as growth, projected around 3 percent in FY2023/24, remains below potential in the context of subdued domestic demand and post‑pandemic balance sheet repairs.

Economic activity is expected to pick up with growth reaching 4.9 percent in FY2024/25, supported by stronger domestic demand. The cautiously accommodative monetary policy stance, the planned increase in capital expenditure in the FY2024/25 budget, additional hydropower generation, and a continued increase in tourist arrivals are predicted to boost domestic demand and growth. Inflation is projected to remain within the Nepal Rastra Bank’s (NRB) target ceiling of 5.5 percent.

The IMF cautions that domestic risks dominate the outlook. "Failure to raise the execution rate of capital projects would deprive the economy of much-needed stimulus and weigh on growth. Fragile political stability could disrupt policy continuity and reform implementation." 

According to the multilateral lending body, the intensification of financial sector vulnerabilities such as a further rise in NPLs or more failures of cooperative lenders could endanger the banking system's soundness. "Externally, high commodity prices could slow the recovery in energy-intensive sectors. Nepal remains vulnerable to natural disasters."