An International Monetary Fund (IMF) team led by Sarwat Jahan concluded a two-week visit to Nepal on June 10, reaching a staff-level agreement with Nepali authorities on the policies and reforms needed to complete the sixth review under the Extended Credit Facility (ECF).
The agreement, which remains subject to approval by the IMF’s Executive Board, would unlock approximately $42.7m in financial assistance. This will bring Nepal’s total disbursement under the ECF to about $331.8m out of an approved $394.75m.
In a statement at the end of the mission, Jahan noted that Nepal has made “satisfactory” progress on its ECF-supported reform agenda, despite some delays in child welfare grant targets. Key completed or near-complete reforms include the finalization of a tax expenditure report, revised National Project Bank guidelines, and a roadmap following a Loan Portfolio Review (LPR). Progress has also been made on amending the Nepal Rastra Bank (NRB) Act, incorporating recommendations from previous IMF assessments.
The IMF mission observed that Nepal’s economy is gradually recovering, supported by improvements in construction, manufacturing, hydropower, and agriculture. GDP growth for 2024/25 is projected to exceed four percent, while inflation eased to 3.4 percent in April following a post-flood spike. The country’s external position has strengthened thanks to rising exports, remittances, and tourism.
However, financial sector vulnerabilities persist. Non-performing loans (NPLs) rose to 5.2 percent in April 2025, impacting bank capital, and concerns remain about the health of savings and credit cooperatives (SACCOs).
Looking ahead, the IMF projects stronger growth in 2025/26 with inflation likely to remain within the central bank’s target range. Yet risks—including weak capital project execution, global uncertainties, and policy disruptions—remain.
The upcoming fiscal year’s budget is broadly aligned with IMF goals to ensure fiscal discipline, boost capital spending, promote private investment, and expand social programs such as the public school midday meal initiative.
The IMF emphasized the need for a cautious approach to establishing an Asset Management Company and highlighted the importance of strengthening the insolvency framework and debt recovery systems. It also praised Nepal’s progress on improving its legal framework for anti-money laundering and counter-terrorism financing.
During the visit, the IMF team held meetings with Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, National Planning Commission Vice-chairperson Shiva Raj Adhikari, Nepal Rastra Bank Governor Biswo Poudel, and other high-level officials, as well as stakeholders from the private sector and development partners. “We are grateful to the Nepali authorities for their hospitality and for open and constructive discussions,” Jahan concluded.
