According to the International Monetary Fund (IMF), Nepal's economic condition, which had deteriorated last year, has shown signs of improvement. In a press release issued on Wednesday, the IMF noted that the cautious accommodative monetary policy, the government's interest in increasing capital expenditure through the budget, the growing production of hydropower, and the positive trend in tourist arrivals suggest a positive outlook for the coming year.

Key Points

- Economic Growth Forecast: The economy, which grew by 3% last fiscal year, is projected to grow by 4.9% in the coming year.

- IMF Support: Following the fourth review of Nepal's economic situation, the IMF's executive board approved the disbursement of SDR 31.4 million (approximately USD 41.3 million).

- Challenges: Inability to execute capital expenditure and the fluid political situation, which could hinder policy continuity and economic achievements.

Factors Contributing to Economic Improvement

- Monetary Policy: Adoption of a cautious accommodative policy and increased interest in capital expenditure through the budget.

- Hydropower Production: Increasing hydropower production is likely to drive economic growth.

- Tourism: Positive trends in tourist arrivals.

Recent Economic Progress in Nepal

- Foreign Exchange Reserves: Nepal's foreign exchange reserves have increased.

- Imports: There has been no need to impose any restrictions on imports.

- Fiscal Discipline: Despite a decline in revenue collection, fiscal discipline has been maintained.

IMF's Perspective

The IMF's executive board noted that Nepal has effectively utilized programs to combat the economic challenges posed by the COVID-19 pandemic and the global economic downturn, which has helped balance the country's overall economic condition.

The inability to execute capital expenditure remains the biggest obstacle to Nepal's economic growth. The IMF suggests that addressing this issue requires a focus on policy continuity. Additionally, maintaining fiscal discipline and increasing foreign exchange reserves are essential for sustained economic growth.