KATHMANDU: The government of Nepal has been advised by the International Monetary Fund (IMF) to closely monitor the country's banking sector as it emerges from recession. This suggestion follows an IMF delegation headed by Sarwat Jahan's September 11–12 visit to Nepal, when they discussed the country's macroeconomic trends and the launch of the Extended Credit Facility program.
In a press release, the IMF emphasized how important it is to continue monitoring the largest banks in the country as well as the struggling cooperative sector. The IMF demanded a more stringent regulatory framework in addition to a thorough analysis of the loan portfolios of the top ten banks, with an emphasis on managing non-performing loans and capital constraints inside institutions.
The IMF has asked Nepal Rastra Bank (NRB), the country's central bank, to carry out a thorough evaluation of the credit quality at the country's largest banks. NRB invited foreign auditors to begin this process, but it recently canceled the bidding process. The IMF emphasized how crucial it was to finish this audit in order to address the banking system's weaknesses.
The IMF reported that Nepal's economy was showing encouraging signs despite these worries. Recent figures indicate that although credit growth is still trailing nominal GDP growth, public investments are rising, tax income is strengthening, and import growth has turned positive.
Although the IMF recognized that Nepal's Anti-Money Laundering Act has recently undergone certain modifications, it also emphasized that additional work remains, including completing the NRB's external audit and amending the NRB Act. It is believed that these steps are necessary to improve accountability, transparency, and governance, particularly in public companies.
The IMF also praised the Investment Facilitation Act as a positive move that will improve Nepal's investment environment. Strengthening these legal and regulatory structures is expected to boost confidence in the country's economic governance and attract additional investment.
According to the IMF assessment, following a period of economic difficulties, Nepal's economy is beginning to show early indications of recovery. It does, however, issue a warning that ongoing attention to detail and changes are required to guarantee a long-term recovery.
The IMF group spoke with a number of high-ranking officials while there, such as Bishnu Prasad Paudel, the Minister of Finance and Deputy Prime Minister, Maha Prasad Adhikari, the Governor of the NRB, and Shiva Raj Adhikari, the Vice-Chairman of the National Planning Commission. The revival of the economy and the banking industry's contribution to growth were the main topics of discussion.
To acquire more understanding of the optimal ways to support Nepal's economic recuperation and growth, the IMF also convened conferences with representatives of the private industry and development partners. Coordination of strategies for strengthening the country's financial and economic institutions was the aim of these discussions.
