KATHMANDU: Nepal’s economy is showing early signs of recovery, according to an official from the International Monetary Fund (IMF) at the conclusion of a recent staff visit to the country.
Led by Sarwat Jahan, the IMF team visited Kathmandu from September 11 to 22, 2024, to discuss recent macroeconomic developments and the implementation of the Extended Credit Facility (ECF)-supported program.
Jahan noted that incoming high-frequency data indicates positive growth in imports, improved tax collections, and an increase in public investment.
Credit growth is also recovering, though it remains appropriately below nominal GDP growth.
Inflation has decelerated to around 3.6 percent by mid-July, partially due to favorable commodity prices and subdued demand.
International reserves continue to rise, supported by robust remittances, recovering tourism, and still subdued imports.
“Accelerating the reform momentum is critical to put the economy on a path towards sustainable, strong, and inclusive economic growth,” Jahan stated.
She emphasized the need to enhance public investment execution, strengthen domestic revenue mobilization, and ensure prompt disbursement of Child Grants.
As banks manage elevated non-performing loans and capital constraints, ongoing vigilance is necessary, including strengthening regulation and completing the loan portfolio review of the largest ten banks.
Addressing vulnerabilities among savings and credit cooperatives remains a priority, it said.
Recent amendments to the Anti-Money Laundering Act have been welcomed, and further reforms, including amendments to the Nepal Rastra Bank (NRB) Act, completion of NRB’s external audit, and increased transparency in public enterprises, are expected to enhance governance and accountability.
The Investment Facilitation Act will also bolster Nepal’s investment climate.
The IMF official praised the authorities for their ongoing efforts to meet key commitments under the Fund-supported program, aided by IMF technical assistance. Performance under the program will be formally assessed during the fifth review.
The IMF team engaged in discussions with Deputy Prime Minister and Minister of Finance Bishnu Prasad Paudel, Nepal Rastra Bank Governor Maha Prasad Adhikari, National Planning Commission Vice-Chairman Dr. Shiva Raj Adhikari, and other senior government and central bank officials.
Meetings with representatives from the private sector and development partners also took place, with Duttagupta, Deputy Director in the IMF’s Asia and Pacific Department, attending key discussions.
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