IMF approves $16.9 million to Nepal
Kathmandu, November 13:
International Monetary Fund (IMF) has — at the completion of its fifth and final review of Nepal’s economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement — made about $16.9 million available to Nepal.
The executive board also approved Nepal’s request for waivers of the non-observance of six structural performance criteria. Waivers were granted in light of the minor or temporary nature of the non-observance of five of the performance criteria, and the corrective actions taken towards the completion of the sixth performance criterion on the revision of the Banking and Financial Institutions Act (BAFIA).
The three-year PRGF arrangement with Nepal was approved on November 19, 2003 for an amount equivalent to about $79.1 million. At the conclusion of the third review, the PRGF arrangement was extended to November 18.
As the peace process moves forward, achievement of sustained higher economic growth and poverty reduction rests on resolution of political uncertainties and continued implementation of key structural reforms in the fiscal, financial, and public enterprise sectors.
“Continued macroeconomic stability is contingent on prudent fiscal policies that take into account the changing needs of the peace process. The 2007-08 budget is appropriately focused on boosting social sector and infrastructure spending, raising the revenue to GDP ratio, and limiting domestic financing,” states the release.
For the medium term, fiscal policy should remain focused on increasing revenue, including through improvements in tax administration and on securing adequate concessional external assistance to raise social and infrastructure spending while reducing the public debt-to-GDP ratio.
“The exchange rate peg to the Indian rupee has served Nepal well in anchoring inflation. Improving external competitiveness requires efficiency-enhancing structural reforms and infrastructure investments,” Takatoshi Kato, deputy managing director and acting chair, said adding that the recent adjustments to petroleum prices are a welcome step on the way to place the finances of Nepal Oil Corporation (NOC) on a sustainable footing.