IMF Executive Board Completes the Fifth Review under the Extended Credit Facility Arrangement for Nepal

March 14, 2025

  • The IMF Executive Board completed the fifth review under the Extended Credit Facility (ECF) Arrangement for Nepal, providing the country with access to SDR 31.4 million (about US$ 41.8 million).
  • Nepal has made tangible progress in implementing economic reforms under the program, despite a challenging political environment and disruptions caused by the September 2024 floods.
  • The growth recovery is expected to continue in FY2024/25, supported by increased capital spending including on reconstruction, an accommodative monetary policy stance, and additional hydropower generation.

Washington, DC: On March 12, 2025, the Executive Board of the International Monetary Fund (IMF) completed the fifth review under the four‑year Extended Credit Facility (ECF) for Nepal, allowing the authorities to withdraw the equivalent of SDR 31.4 million (about US$ 41.8 million) under the ECF. This brings total disbursements under the ECF for budget support thus far to SDR 219.7 million (about US$ 289.1 million).

The ECF arrangement for Nepal was approved by the Executive Board on January 12, 2022 (see Press Release No. 22/6) for SDR 282.4 million (180 percent of quota). Nepal has made tangible progress in implementing reforms under the program, which has supported early signs of economic recovery while preserving macroeconomic and financial stability and protecting the vulnerable.

The economy continues to face challenges with subdued domestic demand. Economic activity is expected to pick up moderately in FY2024/25 on account of disruptions caused by the September 2024 floods. Growth is expected to reach 4.2 percent in FY2024/25, supported by a planned increase in capital spending including on reconstruction, an accommodative monetary policy stance, and additional hydropower generation. Post-flood supply-side pressures are expected to be short-lived, and average inflation is projected to remain close to the Nepal Rastra Bank’s target of about 5 percent. Efforts to mobilize revenues will support development spending and fiscal sustainability. The outlook is subject to important downside risks including those related to possible under-execution of capital spending, financial-sector vulnerabilities, and political fragility.

Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director, made the following statement:

“Executive Directors welcomed the continued recovery and the broadly adequate performance under the program, acknowledging the challenges posed by political uncertainty and recent flood-related disruptions. They noted that while the outlook remains broadly favorable, it is subject to downside risks. Accordingly, Directors encouraged continued prudent policies to safeguard macroeconomic stability and steadfast implementation of structural reforms to foster sustainable and inclusive growth. Fund capacity development will also be important to achieve program objectives.

“Directors recommended continued gradual, growth-friendly fiscal consolidation to stabilize debt. Noting the need to mobilize revenue to support higher capital spending and protect the vulnerable, Directors welcomed the newly adopted Domestic Revenue Mobilization Strategy. They also underscored the need to strengthen public investment management to enhance capital spending execution. Further advancing fiscal transparency would help to contain fiscal risks and strengthen fiscal sustainability. Directors emphasized the importance of supporting the most vulnerable including through expanding child grants.

“Directors agreed that monetary policy should remain cautious and data-driven to preserve price and external stability. They highlighted the importance of amending the Nepal Rastra Bank Act to strengthen its governance, independence and accountability.

“Directors underscored that increasing financial sector vulnerabilities warrant a proactive approach. They encouraged steps to further align financial sector regulations with international standards, conduct the planned Loan Portfolio Review, and develop a comprehensive strategy to address problematic savings and credit cooperatives. Noting Nepal’s recent FATF grey listing, Directors stressed the urgency of strengthening the AML/CFT framework through reforms to enhance legal, regulatory, and supervisory frameworks.

“Directors called for ambitious structural reforms to support more sustainable and inclusive growth. They recommended efforts to reduce the high cost of doing business, enhance the investment climate, improve governance, and strengthen anticorruption institutions. Nepal’s high vulnerability to natural disasters underscores the importance of enhancing resilience to climate shocks.”

 

                                                                                           Nepal: Selected Economic Indicators 2021/22-2029/30 1/

 

 

2021/22

 

2022/23



2023/24

   

2024/25

2025/26

2026/27

2027/28

2028/29

2029/30








Est.

   


Projections


       


             


   


Output and Prices (annual percent change)



 


             


   


Real GDP

5.6

 

2.0


 

3.1

 


4.2

5.4

5.0

5.0

5.0

5.0


Headline CPI (period average)

6.4

 

7.7


 

5.4

 


5.2

5.4

5.4

5.4

5.4

5.4


Headline CPI (end of period)

8.1

 

7.4


 

3.6

 


5.5

5.4

5.4

5.4

5.4

5.4


Fiscal Indicators: Central Government (in percent of GDP)





           


 


Total revenue and grants

22.9


19.3



19.2



19.8

20.9

21.5

22.1

22.6

22.6


  of which: Tax revenue

19.8


16.2



16.4



17.0

17.8

18.4

19.1

19.6

19.6


Expenditure

26.1


25.2



21.9



24.3

25.0

25.4

25.8

26.2

26.2


Expenses

21.7


20.8



18.6



19.3

19.4

19.5

19.6

19.8

19.8


Net acquisition of nonfinancial assets

4.3


4.4



3.3



5.0

5.6

5.9

6.2

6.4

6.4


Operating balance

1.2


-1.4



0.6



0.5

1.5

2.1

2.5

2.8

2.8


Net lending/borrowing

-3.1


-5.8



-2.7



-4.5

-4.1

-3.8

-3.7

-3.6

-3.6


Statistical discrepancy

0.0


0.0



0.0



0.0

0.0

0.0

0.0

0.0

0.0


Net financial transactions

3.1


5.8



2.7



4.5

4.1

3.8

3.7

3.6

3.6


Net acquisition of financial assets

2.6


-0.9



0.5



1.3

1.3

1.3

1.3

1.3

1.3


Net incurrence of liabilities

5.8


4.9



3.2



5.8

5.4

5.1

5.0

4.9

4.9


Foreign

2.0


1.7



1.6



1.7

1.5

1.4

1.3

1.3

1.4


Domestic

3.7


3.3



1.6



4.1

3.9

3.7

3.7

3.5

3.5







   


   


   

Money and Credit (annual percent change)





         


   


Broad money

6.8


11.4



13.6



10.1

10.1

10.3

10.5

10.7

10.7


Domestic credit

17.9


8.8



6.2



8.2

9.6

10.3

10.5

10.7

10.7


Private sector credit

13.3


4.6



6.1



7.2

8.1

9.1

10.0

10.7

10.7



     


             


   


Saving and Investment (in percent of nominal GDP)

   


             


 


Gross investment

37.6


31.7



32.9



37.5

39.4

38.3

37.0

35.8

34.7


Gross fixed investment

29.0


25.1



26.1



29.7

31.2

30.4

29.3

28.3

27.5


Private

23.6


21.7



22.7



24.7

25.6

24.5

23.1

21.9

21.1


Central government

5.3


3.4



3.3



5.0

5.6

5.9

6.2

6.4

6.4


Change in Stock

8.7


6.6



6.8



7.8

8.2

8.0

7.7

7.4

7.2


Gross national saving

25.1


30.8



36.7



36.2

35.5

34.5

33.2

32.2

31.0


Private

24.4


32.7



36.5



36.3

34.9

33.3

31.6

30.1

29.1


Central government

0.7


-1.9



0.2



-0.1

0.6

1.2

1.7

2.0

2.0









           


 


Balance of Payments

 






           


 


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

-5,174


-361



1,663



-630

-1,969

-2,166

-2,321

-2,479

-2,760


In percent of GDP

-12.6


-0.9



3.8



-1.3

-3.8

-3.8

-3.7

-3.6

-3.7


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

-13,759


-10,699



-10,431



-12,481

-15,053

-15,957

-16,797

-17,678

-18,664


In percent of GDP

-33.4


-26.2



-24.0



-26.7

-29.2

-28.2

-27.0

-25.8

-24.8


Exports of goods (y/y percent change)

43.9


-19.9



-2.5



8.9

9.6

9.1

9.7

9.4

9.4


Imports of goods (y/y percent change)

21.9


-22.0



-2.5



18.4

19.4

6.3

5.7

5.7

6.0


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

8,326


9,485



10,864



11,151

11,680

12,258

12,766

13,283

13,767


In percent of GDP

20.2


23.2



25.0



23.8

22.7

21.6

20.5

19.4

18.3


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

8,956


10,954



14,547



15,301

15,004

14,821

14,876

14,897

15,289


In months of prospective imports

7.6


9.3



10.5



9.4

8.7

8.1

7.7

7.2

7.0


Memorandum Items





               


 


Public debt (in percent of GDP)

42.7


47.1



48.2



50.0

50.4

50.6

50.6

50.5

50.5


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

41.2


40.9



43.4



46.8

51.5

56.6

62.3

68.5

75.3


Nominal GDP (in billions of Nepalese Rupees)

4,977


5,349



5,776



6,333

7,040

7,792

8,623

9,543

10,562


Net International Reserves (in millions of U.S. dollars)

8,821


10,507



14,064



14,744

14,451

14,321

14,440

14,541

15,027


Primary Deficit (in billions of Nepali Rupees)

110


239



76



183

179

175

180

182

204


Primary Deficit (in percent of GDP)

2.2


4.5



1.3



2.9

2.5

2.2

2.1

1.9

1.9


Tax Revenue (in billions of Nepalese Rupees)

984


866



945



1,074

1,250

1,436

1,648

1,868

2,065


Tax Revenue (In percent of GDP)

19.8


16.2



16.4



17.0

17.8

18.4

19.1

19.6

19.6


Private sector credit (in percent of GDP)

94.2


91.7



90.1



88.0

85.6

84.3

83.8

83.8

83.9


Exchange rate (NPR/US$; period average)

120.8


130.8



133.0




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

1.6


1.2



1.4




                                                                                                                       








     


   


1/ Fiscal year ends in mid-July.


       


             
                                                     

Note: The NSO adopts a 3 year cycle in its national accounts producing preliminary, revised and final estimates for real GDP growth. In May 2023 growth was revised up in FY2020/21 from 4.2 percent to 4.8 percent and from 5.3 percent to 5.6 percent in FY2021/22 in light of new data.

Note: Current baseline forecast is as of January 29, 2025.

   

·      

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Pemba Sherpa

Phone: +1 202 623-7100Email: MEDIA@IMF.org