The Nepali authorities and the IMF have reached a staff-level agreement on the 4th reviewa staff-level agreement on the 4th review of under the Extended Credit Facility, which was approved in 2022.
The agreement is subject to approval by the IMF’s Executive Board. Completion would make available SDR 31.4 million (about US$41.6 million), bringing total disbursements under the ECF thus far to SDR 188.3 million (about US$249.7 million), from a total of SDR 282.42 million (about US$380.2 million).
Important achievements during the review period include:
- Domestic Revenue Mobilization Strategy by the Ministry of Finance aimed at strengthening tax collection
- Action Plan by the National Planning Commission (NPC) aimed at improving execution of budgeted capital projects.
- Incorporating most Extra Budgetary Funds accounts in the annual financial statements published by the Financial Comptroller General Office
- Publishing audited financial statements for some key public enterprises
- Finalization and full implementation of the Supervisory Information System for all banks
- Progress on the procurement of an independent international consultant to assist NRB in the conduct of the Loan Portfolio Review (LPR) of the 10 largest banks.
Planned reforms include:
- Launch the LPR of the banking system
- Submit to Parliament amendments of the NRB Act
- Involve the service of experts with international experience in auditing and central bank auditing for an audit of NRB’s FY23/24 financial statements.
- Publish annual financial statements by all majority and wholly owned public enterprises
- Publish audit of the financial statements of four priority public enterprises
- Implementation of key reforms in the 2023 Financial Sector Stability Report.
- Publish a comprehensive tax expenditure report
- Publish a fiscal risk statement
- Revise and approve the National Project Bank Operational Procedures and the Unified Directives related to project development, prioritization, and selection
- Report consolidated financial information of all extrabudgetary operational funds
- Develop a strategy to deal with issues in the SACCO sector, including to reform the supervisory framework and architecture
Macroeconomic outlook
- 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, planned increase in capital expenditure in the FY2024/25 budget, additional hydropower generation, and continued increase in tourist arrivals are expected to boost domestic demand and growth.
- Inflation is expected to remain within the NRB’s target ceiling of 5.5 percent.
- Nepal’s external position continues to strengthen, reflecting prudent policies, buoyant remittances, and subdued imports.
- Nepal’s medium-term outlook remains favorable as strategic investments in infrastructure, especially in the energy sector, are expected to support potential growth.
