IMF expresses concern over slow progress in Nepal's economic and financial reforms

KATHMANDU: The International Monetary Fund (IMF) has voiced its apprehensions regarding the sluggish pace of economic and financial reforms in Nepal's government. Following a recent visit to the country, an IMF delegation led by Tidian Kinda, the deputy division chief of the IMF’s Asia-Pacific Department, highlighted several areas where progress has been deemed slow. Among the key recommendations put forth by the IMF are amendments to the Nepal Rastra Bank (NRB) Act, international audit reports on bank credit, and an independent audit of the NRB.

One of the IMF's primary suggestions has been to grant autonomy to the NRB, advocating for the removal of Ministry of Finance representatives from the NRB board. Additionally, the IMF has emphasized the necessity of external audits for NRB financial transactions and scrutiny of loans extended by major banks. The IMF has also underscored the importance of thorough reporting on tax revenue utilization, scrutiny of financial risks in government systems, and reforms in the national project bank selection process.

In a bid to bolster transparency and effectiveness in budget expenditure, the IMF has encouraged the government to collaborate on reform initiatives in the financial and economic sectors. The government is currently engaged in formulating policies aimed at enhancing inland revenue mobilization, increasing capital expenditure, and ensuring financial transparency. Moreover, the IMF's recent visit confirmed the disbursement of the fourth installment under the Extended Credit Facility (ECF) to Nepal, part of a concessional loan approved by the IMF Executive Board during the COVID-19 pandemic.

Through the ECF, the IMF provides financial assistance to countries for structural and policy reforms, medium-term balance of payments, inland revenue mobilization, public investment management, and financial risk reduction. Nepal has utilized the funds received through the ECF for budgetary assistance, with ongoing efforts to implement reform measures in collaboration with the IMF.