Kathmandu, Ashoj 8 (Sep 24): The International Monetary Fund (IMF) has said that despite the initial signs of improvement in Nepal’s economy, reform initiatives are still needed in some areas. The IMF team, led by Sarawat Jahan, the resident representative of the IMF for Sri Lanka, is visiting Nepal from September 11 to 22.
The main purpose of this visit is to review the status of the implementation of the Extended Credit Facility (ECF) program provided by the IMF to Nepal and to get information about the macroeconomic situation, the statement said. “Nepal’s economy is showing early signs of recovery. The new data shows that the growth of imports is entering a positive direction. Tax collection is improving and public investment is increasing”, the statement issued by the IMF said. According to the IMF, there are signs of improvement such as improvement in credit expansion, reduction in inflation, increase in foreign exchange reserves.
The increase in foreign exchange reserves is attributed to the increase in remittance inflows, the return to the line of the tourism sector and the decrease in the share of imports in foreign trade. Although there are initial signs of economic improvement, IMF has suggested that Nepal needs to do some important things to speed it up.
“It is necessary to speed up the pace of reforms to take the economy on the path of strong and inclusive economic development. For this, it is necessary to strengthen the implementation of public investment, to strengthen internal revenue collection, and to make grant distribution effective and quick”, the statement said. Credit portfolio review (CPR) of 10 large commercial banks is one of the important conditions set by the IMF for the implementation of the CFS in Nepal. Nepal Rastra Bank has called for proposals to proceed with the CPR process, but after financial and technical evaluation, this process has been canceled as none of the companies are found to be eligible.
The National Bank has started this process again with the call for proposal process. But the IMF has said that ‘CPR’ of big banks is necessary. “Continuous monitoring is necessary when banks are facing increasing bad loans and capital management problems. “It is important to further strengthen the regulation of banks and financial institutions and to complete the review of the loan portfolios of the Big 10 commercial banks,” the IMF said in a statement. IMF has suggested to give priority to solving problems in savings and credit cooperatives. Mentioning that the amendment of the Prevention of Money Laundering Act is positive, the IMF has stressed the need for amendments to the Nepal Rastra Bank Act, external audit of the Rastra Bank, and increased transparency of public institutions. The IMF is in the process of reviewing the fifth tranche of ECF.
While in Nepal, the IMF team met and discussed with Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, Nepal Rastra Bank Governor Mahaprasad Adhikari, National Planning Commission Vice Chairman Dr. Similarly, the statement mentions that the IMF team discussed with representatives of the private sector and development partners.
