IMF senses Investment-Friendly Environment in Nepal’s Energy Sector

KATHMANDU, FEBRUARY 13: A delegation from the International Monetary Fund (IMF) has found an investment-friendly environment in the energy infrastructure sector of Nepal despite various challenges in the country’s economy.

The IMF staff team, led by Tidiane Kinda, conducted a staff visit to Nepal from February 5 to 12 to discuss recent macroeconomic developments and the implementation of the Fund-supported programme.

“Nepal’s external position continues to strengthen on the back of buoyant remittances, increasing tourism activity, subdued imports, and a decline in inflation. Weak domestic demand, large outward migration, and low credit growth despite monetary relaxation continue to weigh on near-term economic growth,” team leader Kinda said in a press note issued after their visit on Monday.

The IMF team suggested that enhancing domestic revenue mobilization and accelerating the execution of capital expenditure will provide needed support to growth while securing fiscal sustainability.

Increased vigilance on banks’ asset quality and stepped-up supervisory efforts are important to preserve financial stability because of growing non-performing loans, added the statement.

According to the IMF delegation, the medium-term economic outlook of Nepal remains favourable, as strategic investments in infrastructure, especially in the energy sector, are expected to support potential growth.

The upcoming Investment Summit presents an opportunity to showcase Nepal’s economic potential, said the team, adding, “Timely reforms to durably improve the investment climate will help take full advantage of the summit and pave the way to stronger growth in the future.”

The visiting delegation welcomed the government authorities’ ongoing efforts in meeting key commitments under the International Monetary Fund-supported programme, with the support of IMF’s technical assistance.

Performance under the programme will be formally assessed in the context of the fourth review of the Extended Credit Facility, which is expected to take place in the middle of the year, states the press note.