IMF Executive Board Approves a US$214 Million Disbursement to Nepal to Address the COVID-19 Pandemic

May 6, 2020

  • The IMF Executive Board approves the 50th request for emergency financial assistance to help its member countries address the challenges posed by COVID-19.
  • The IMF Executive Board approved the disbursement of US$214 million in emergency financing to help Nepal address urgent balance of payments needs created by COVID-19, which is having a severe impact on remittances, tourism, and domestic activity, and will substantially weaken Nepal’s GDP growth, balance of payments, and fiscal position.
  • To address the pandemic, the Government of Nepal has taken measures to increase health spending, strengthen social assistance, ensure adequate liquidity in the financial system, and support access to credit.
  • IMF financing will help fill immediate financing needs and will catalyze additional financing from Nepal’s development partners to support the COVID-19 response.

Washington, DC – The Executive Board of the International Monetary Fund (IMF) approved a disbursement to Nepal under the Rapid Credit Facility (RCF) equivalent to SDR156.9 million (about US$214 million, 100 percent of quota) to help cover urgent balance of payments and fiscal needs stemming from the COVID-19 pandemic.

The COVID-19 pandemic is having a severe impact on Nepal’s economy. During recent months, remittances have fallen considerably, tourist arrivals collapsed, and domestic activity has taken a hit amid social distancing measures.

The authorities’ immediate priority has been to deal with the human and economic impact of the COVID-19 pandemic. The authorities are increasing health spending, including by providing additional incentive pay and insurance coverage to all medical front-line personnel, importing additional medical supplies, and setting up quarantine centers and temporary hospitals. They are also strengthening social assistance by providing those most vulnerable with daily food rations, subsidizing utility bills for low-usage customers, and taking steps to partially compensate those who suffer job loss. In addition, measures are being implemented to ensure adequate liquidity in the financial system and support continued access to credit.

The IMF financial support will make a substantial contribution to filling immediate external and fiscal financing needs that have emerged due to COVID-19. It is also expected to catalyze additional support from development partners.

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Chair, made the following statement:

“The global and domestic measures to contain the COVID-19 pandemic are severely affecting the Nepali economy, through their impact on remittances, tourism, and domestic activity. These have given rise to an urgent balance of payments need and a fiscal financing gap. Fund support under the Rapid Credit Facility, following the recent approval of debt service relief under the Fund’s CCRT, will help the authorities address immediate financing needs and catalyze additional support from other development partners.

“The authorities are taking proactive, well-targeted measures to address the human and economic impact of the pandemic, while preserving macroeconomic stability. Such measures include increasing health spending, strengthening social assistance to protect the most vulnerable, and providing bank liquidity and credit support.

“Additional assistance from development partners, beyond what had already been committed before the outbreak of the pandemic, is needed to close the remaining balance of payments gap and ease the fiscal situation. The authorities’ commitment to high standards of transparency and governance in the management of financial assistance is welcome.

“Beyond the immediate response to the external shock, the authorities should remain committed to policies that promote inclusive growth and resilience, while containing external pressures, protecting financial stability, and preserving fiscal sustainability. Strengthening good governance and accountability would also be important.”

For information on the emergency financing requests approved by the IMF Executive Board, please see a link to the IMF Lending Tracker:
https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker

For upcoming discussions on the emergency financing requests, please see a link to the calendar of the IMF Executive Board meetings: https://www.imf.org/external/NP/SEC/bc/eng/index.aspx

Table 1. Nepal: Selected Economic Indicators, 2017/18-2024/25 1/

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

Est.

2020 Article IV Baseline Proj.

Current Baseline Proj.

2020 Article IV Baseline Proj.

Current Baseline Proj.

Projections

Output and prices (annual percent change)

Real GDP

6.7

7.1

6.0

1.0

5.7

3.5

6.5

5.4

5.2

5.2

Headline CPI (period average)

4.1

4.6

6.0

6.7

5.9

6.5

5.8

5.6

5.3

5.3

Headline CPI (end of period)

4.6

6.0

5.9

7.5

5.8

6.0

5.6

5.5

5.3

5.3

Fiscal Indicators: Central Government (in percent of GDP)

Total revenue and grants

25.3

26.0

25.8

24.0

26.0

25.2

25.2

25.1

25.2

25.2

of which: Tax revenue

21.1

21.9

21.9

20.0

21.8

21.0

21.0

21.0

20.9

21.1

Expenditure

31.9

30.6

30.4

31.2

30.4

31.8

29.9

29.6

29.5

29.4

Expenses

23.0

23.6

23.1

25.1

23.1

24.8

23.1

22.8

22.9

22.9

Net acquisition of nonfinancial assets

8.9

7.0

7.3

6.1

7.3

7.0

6.8

6.8

6.6

6.5

Operating balance

2.3

2.4

2.8

-1.1

2.9

0.4

2.1

2.3

2.3

2.3

Net lending/borrowing

-6.7

-4.6

-4.5

-7.2

-4.4

-6.6

-4.7

-4.5

-4.3

-4.2

Statistical discrepancy

-3.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net financial transactions

3.6

4.6

4.5

7.2

4.4

6.6

4.7

4.5

4.3

4.2

Net acquisition of financial assets

-0.7

1.7

1.6

1.6

0.9

0.9

0.9

0.9

0.9

0.9

Net incurrence of liabilities

2.9

6.3

6.1

8.8

5.3

7.5

5.6

5.4

5.2

5.1

Foreign 2/

2.4

2.1

2.4

3.6

1.9

1.5

1.6

1.6

1.4

1.3

Domestic

0.4

4.2

3.7

5.2

3.4

5.9

4.0

3.7

3.7

3.8

Money and credit (annual percent change)

Broad money

19.4

15.8

13.2

8.6

11.9

11.4

12.7

11.3

10.8

10.8

Domestic credit

26.1

21.7

17.6

16.0

15.7

17.5

14.6

13.5

13.4

13.2

Private sector credit

22.3

19.1

15.0

11.5

13.8

13.3

12.8

12.2

12.3

12.1

Saving and Investment (in percent of nominal GDP)

Gross investment

55.2

62.3

54.6

51.0

53.4

51.1

49.1

48.2

47.4

46.6

Private

25.8

30.0

25.1

24.2

24.4

23.3

22.3

21.8

21.5

21.1

Central government

8.9

7.0

7.3

6.1

7.3

7.0

6.8

6.8

6.6

6.5

Change in Stock

20.5

25.3

22.2

20.8

21.7

20.8

20.0

19.6

19.3

18.9

Gross national saving

47.1

54.6

49.4

43.5

48.5

44.0

43.4

43.0

42.6

42.3

Private

46.1

53.3

47.8

45.8

47.0

45.0

42.8

42.1

41.7

41.4

Central government

1.0

1.2

1.6

-2.3

1.5

-1.1

0.6

0.9

0.9

0.9

Balance of Payments

Current account (in millions of U.S. dollars)

-2,350

-2,369

-1,760

-2,426

-1,832

-2,452

-2,168

-2,101

-2,093

-2,001

In percent of GDP

-8.1

-7.7

-5.2

-7.6

-4.9

-7.1

-5.7

-5.2

-4.8

-4.2

Trade balance (in millions of U.S. dollars)

-10,849

-11,373

-11,658

-9,691

-12,379

-10,455

-10,953

-11,457

-11,995

-12,497

In percent of GDP

-37.4

-37.1

-34.2

-30.2

-33.1

-30.3

-29.0

-28.2

-27.5

-26.5

Exports of goods (y/y percent change)

15.5

12.1

1.4

-6.4

9.9

5.0

10.4

10.4

10.4

10.4

Imports of goods (y/y percent change)

27.4

5.4

2.4

-14.1

6.5

7.6

5.2

5.1

5.2

4.8

Workers' remittances (in millions of U.S. dollars)

7,224

7,769

8,402

6,012

8,825

6,572

6,975

7,368

7,746

8,144

In percent of GDP

24.9

25.3

24.7

18.7

23.6

19.1

18.5

18.1

17.7

17.3

Gross official reserves (in millions of U.S. dollars)

9,304

8,545

8,536

8,049

8,419

7,046

6,469

6,096

5,800

5,691

In months of prospective imports

7.9

8.2

6.6

7.2

6.1

6.0

5.2

4.7

4.2

4.0

Memorandum items

Public debt (in percent of GDP)

30.2

30.1

33.7

38.0

35.7

42.4

43.8

45.3

46.7

47.8

Nominal GDP (in billions of U.S. dollars)

29.0

30.7

34.1

32.1

37.4

34.5

37.7

40.7

43.7

47.1

Nominal GDP (in billions of Nepalese Rupees)

3,031

3,464

3,892

3,735

4,354

4,117

4,638

5,163

5,721

6,338

Private Sector Credit (in percent of GDP)

80.6

84.0

86.0

86.9

87.5

89.3

89.4

90.1

91.2

92.3

Exchange rate (NPR/US$; period average)

104.4

112.9

…

…

…

…

…

…

…

…

Real effective exchange rate (average, y/y percent change)

0.2

-1.4

…

…

…

…

…

…

…

…

Sources: Nepali authorities; and IMF staff estimates and projections.

1/ Fiscal year ends in mid-July.

2/ Net incurrence of foreign liabilities reflects pre-COVID identified financing and new financing (identified as of April 15) to support the COVID-response, including the

IMF-RCF (US$214 million), Asian Development Bank (US$250 million), and World Bank (US$29 million).

Note: 2020 Article IV Baseline is based on data as of end-Jan 2020, while current baseline forecast is as of April 15, 2020.

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