On October 1, 2025, the Executive Board of the International Monetary Fund (IMF) completed its sixth review under the Extended Credit Facility (ECF) arrangement for Nepal. This decision allows Nepal to access a further disbursement of SDR 31.4 million, which is approximately US$43.05 million. With this latest installment, total disbursements to Nepal under the ECF have reached SDR 251.1 million, or about US$341.2 million.
The ECF arrangement was initially approved on January 12, 2022, for SDR 282.4 million, representing 180 percent of Nepal’s quota at the IMF. Since then, Nepal has made progress in implementing reforms tied to the program. These reforms have supported economic recovery efforts while maintaining macroeconomic stability and providing protection for vulnerable groups.
Nepal’s political environment has seen significant changes recently due to youth-led protests focused on corruption, governance issues, and inequality—concerns that were intensified by slow economic growth and limited job opportunities. These events led to the formation of an interim government. Despite these challenges, projections indicate that economic recovery will continue into fiscal year 2025/26. The outlook is supported by budget measures aimed at improving project execution and boosting private sector confidence; monetary policy remains accommodative.
Inflation is expected to stay within the target set by Nepal Rastra Bank at around five percent. Imports are anticipated to recover as pent-up demand returns and capital expenditure increases, especially in reconstruction and energy projects. Revenue mobilization efforts are also underway to support development spending and maintain fiscal sustainability.
The medium-term forecast remains positive for Nepal, anchored by investments in infrastructure such as hydropower and ongoing structural reforms designed to increase productivity and competitiveness while promoting private sector-led growth. However, there are growing risks related to under-execution of capital expenditures, vulnerabilities in the financial sector, natural disasters, social unrest, political uncertainty, and global trade tensions.
Following the Executive Board’s discussion on Nepal’s progress under the ECF program, Mr. Bo Li, Deputy Managing Director of the IMF stated:
"In the midst of a challenging domestic socio-economic environment, Nepal’s reform program supported by the Extended Credit Facility (ECF) continues to underpin a gradual economic recovery while preserving macroeconomic stability and protecting the vulnerable. Program performance remains broadly adequate despite political volatility and the uncertain global context. Given the difficult political context, continued program ownership and commitment to the country’s economic reforms remain of paramount importance to support growth, reduce poverty and foster public trust.
Gradual fiscal consolidation that supports post-protest reconstruction needs and economic recovery while preserving fiscal sustainability remains critical. Capital spending execution should be boosted by strengthening Public Investment Management and implementing the recently revised National Project Bank guidelines. It is essential to protect the most vulnerable through a full execution of the child grant budget by expanding the coverage and the per‑beneficiary allowance. Implementation of reforms recommended in the Domestic Revenue Mobilization Strategy and the Tax Expenditure Report will reinforce medium-term fiscal sustainability. Building on the recently published fiscal risk statement, continued reforms are essential to further strengthen fiscal transparency and contain fiscal risks.
Monetary policy should remain data driven and appropriately accommodative to support the recovery while preserving price stability. Any potential regulatory forbearance should be limited, targeted, and time-bound. Vigilance is also needed to address rising financial sector vulnerabilities, including timely completion of the Loan Portfolio Review and decisive actions to resolve problematic savings and credit cooperatives. The Nepal Rastra Bank should strengthen its governance, independence, and accountability through amendments to the NRB Act. The establishment of an asset management company should be approached with caution given potential risks. Achieving concrete results in implementation of the anti-money laundering framework is key to expediting Nepal’s exit from the FATF grey list.
Addressing structural barriers to strengthen the anticorruption framework and institutions, improve good governance, and enhance the investment climate will bolster economic resilience. Strengthening social protection to ensure growth is sustainable and inclusive remains a priority."
Economic indicators provided by Nepali authorities along with IMF staff estimates show that real GDP growth for FY2023/24 was revised down from 3.9 percent to 3.7 percent following new data released in May 2025; inflation rates are projected near target levels; public debt stands just below fifty percent of GDP; remittances continue as a major source of foreign currency inflow; official reserves cover more than ten months’ worth of imports; tax revenue collection efforts persist amid fluctuating expenditure patterns.
The IMF noted that addressing downside risks—including those stemming from capital expenditure shortfalls or financial sector weaknesses—is important for sustaining inclusive growth going forward.