International Monetary Fund (IMF) Expresses Concern Over Slow Progress in Nepal’s Economic and Financial Reforms
The International Monetary Fund (IMF) has raised concerns regarding the slow progress of the Nepalese government in implementing crucial economic and financial reforms. During a recent visit to Nepal, an IMF delegation led by Tidian Kinda, Deputy Division Chief of the IMF’s Asia-Pacific Department, highlighted several areas requiring urgent attention.
The delegation emphasized the need for amendments to the Nepal Rastra Bank (NRB) Act and recommended conducting international audit reports on loans provided by various banks, alongside an independent audit of the NRB itself. The IMF has consistently urged the Nepalese government to grant autonomy to the NRB, advocating for the removal of Ministry of Finance representatives from the NRB board. Furthermore, the IMF called for external audits of the NRB's financial transactions and scrutiny of loans extended by the country’s ten largest banks.
Additional reform measures suggested by the IMF include detailed reporting on the utilization of tax-generated funds, assessment of financial risks within the government system, revision of the national project bank selection procedures, and the formulation and implementation of development and prioritization guidelines.
“The establishment of a project bank and allocation of funds to development projects prioritized by this bank will curb the rampant spending by political leaders. It will also enhance budget transparency and ensure effective expenditure,” the IMF stated in its press release.
In collaboration with the IMF, the Nepalese government is striving to make its financial and economic reform measures more effective. Current policy measures under consideration include strategies for Inland Revenue mobilization, plans to increase capital expenditure, and initiatives to enhance financial transparency.
The IMF delegation confirmed the approval of the fourth installment under the Extended Credit Facility (ECF) for Nepal. In response to the COVID-19 pandemic, the IMF Executive Board approved a concessional loan of USD 398.8 million to Nepal under the ECF, scheduled over four years starting from mid-January 2022. While the third installment has already been disbursed, the final installment of Rs 5.59 billion (approximately USD 42 million) remains pending.
Through the ECF, the IMF provides financial assistance to various countries, supporting structural and policy reforms, medium-term balance of payments, Inland Revenue mobilization, public investment management, and financial risk reduction. Nepal has been utilizing the loan received under the ECF for budgetary assistance purposes.
