KATHMANDU, MAY 2

The executive board of International Monetary Fund (IMF) has completed the first and second reviews under the extended credit facility (ECF) for Nepal, allowing the country to withdraw the equivalent about $52.8 million and bringing total disbursements under the ECF for budget support so far to about $157.4 million.

The ECF arrangement for Nepal, approved by the IMF executive board on January 12, 2022, aims to protect vulnerable groups, preserve macroeconomic and financial stability, and support sustained growth and poverty reduction. The programme is also helping to catalyse additional financing from Nepal's development partners.

As per IMF, despite a challenging global and domestic environment, Nepal has continued to make progress with the implementation of the ECF-supported programme.

IMF further stated that the Nepali authorities have taken decisive actions to maintain a stable macroeconomic environment in the context of the post-COVID-19 recovery and global shocks.

As per IMF, inflation remains elevated, but is projected to decline to the Nepal Rastra Bank's seven per cent target by the end of fiscal 2022-23. The overall fiscal deficit is expected to reach 4.5 per cent of GDP in fiscal 2022-23, and current account deficit is expected to narrow to 5.2 per cent of GDP in fiscal 2022-23.

Following the executive board's discussion, Bo Li, deputy managing director and acting chair, issued a statement acknowledging Nepal's progress and commitment to economic reform.

He emphasised the need for fiscal consolidation and further structural reforms to support medium-term fiscal sustainability and reduce vulnerability to climate change.

'The Nepal Rastra Bank is prioritising the asset quality of banks and advancing the financial sector reform agenda. Structural reform priorities include lowering the cost of doing business, removing barriers for foreign investment, improving governance, and strengthening anti-corruption institutions.'

Meanwhile, the executive board also concluded the 2023 Article IV consultation with Nepal.

A version of this article appears in the print on May 3, 2023, of The Himalayan Times.