The International Monetary Fund (IMF) Executive Board has concluded the fifth review under the Extended Credit Facility (ECF) arrangement for Nepal. This decision, made on March 12, 2025, permits Nepal to withdraw SDR 31.4 million (approximately US$ 41.8 million), bringing total disbursements under the ECF to SDR 219.7 million (about US$ 289.1 million).
Approved on January 12, 2022, the ECF arrangement provides SDR 282.4 million to Nepal and aims to support economic recovery while maintaining macroeconomic stability and protecting vulnerable populations.
Nepal's economy faces challenges due to subdued domestic demand but is expected to grow by 4.2 percent in FY2024/25, aided by increased capital spending, accommodative monetary policy, and additional hydropower generation. The impact of recent floods is anticipated to be temporary, with inflation projected near the central bank's target of around 5 percent.
Bo Li, IMF Deputy Managing Director, stated: "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."
Directors emphasized prudent policies for macroeconomic stability and structural reforms for sustainable growth. They highlighted fiscal consolidation efforts through revenue mobilization and public investment management improvements.
"Directors recommended continued gradual, growth-friendly fiscal consolidation to stabilize debt," said Mr. Li.
Monetary policy should remain cautious to preserve stability while financial sector vulnerabilities require proactive measures aligning regulations with international standards.
"Directors underscored that increasing financial sector vulnerabilities warrant a proactive approach," Mr. Li added.
Structural reforms are encouraged to reduce business costs and improve governance amid high vulnerability to natural disasters.
"Directors called for ambitious structural reforms to support more sustainable and inclusive growth," Mr. Li noted.
The IMF will continue supporting Nepal's reform efforts through capacity development initiatives as part of achieving program objectives.