Kathmandu: The Nepali authorities and the International Monetary Fund (IMF) team reached a staff-level agreement for a disbursement of about $51.3 million under the third review of the Extended Credit Facility (ECF) arrangement.
The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. It supports countries’ economic programs aimed at moving toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth.
The agreement is subject to approval by the IMF’s Executive Board, according to a press release issued by IMF on October 5. Nepal’s external position has strengthened, supported by prudent fiscal and monetary policies, buoyant remittances, and increasing tourism activity.
Following a slowdown last year, growth is projected to recover to 3.5 percent in FY2023/24, but to remain below potential, reflecting weak domestic demand, the IMF said in press statement. Inflation is declining but is still elevated, the press release stated. It further stated that necessary balance sheet repairs have been limiting credit growth in spite of monetary relaxation. Reforms under the ECF aim to generate more stable, pro-growth credit while maintaining price and external stability.
An International Monetary Fund (IMF) team led by Tidiane Kinda visited Kathmandu from September 21 to October 5 to hold discussions on the policies and reforms which led to the completion of the third review of the authorities’ economic program supported by the IMF’s Extended Credit Facility (ECF).
“Nepal continues to make progress with the implementation of the ECF-supported program. On the fiscal front, important achievements by the Ministry of Finance include the formulation of a fiscal risk register, the publication of the non-custom tax exemptions, and the implementation of a cash flow forecasting framework, all reforms aimed at strengthening transparency of public finances and further enhancing fiscal management,” Kinda said.