Nepal Rastra Bank (NRB) has decided to appeal to the International Monetary Fund (IMF) to continue the Extended Credit Facility (ECF). The IMF had set a condition to halt the ECF if an audit of the loan quality of Nepalese banks was not conducted.

Key Developments:

IMF's Condition:
- The IMF set a condition that Nepal must conduct an audit of the 10 largest commercial banks to continue receiving funds under the ECF.
- Applications were called, and a technical selection of the auditing company was initiated.
Audit Process Cancelled:
- The NRB canceled the audit process citing legal reasons. Previously, five foreign audit firms were shortlisted, but only KPMG was selected for the financial proposal.
- The entire process was canceled after KPMG's proposal was rejected because it exceeded the cost estimate and available budget as per the Public Procurement Act 2063.
Decision to Start a New Process:
- After canceling the audit process, NRB decided to request additional time from the IMF to initiate a new process and is preparing to appeal not to halt the fifth installment of the ECF.

Extended Credit Facility (ECF):

Loan Amount: Nepal has taken a loan facility of USD 398.8 million from the IMF. Four installments have already been received, and preparations are underway for the fifth installment.
Fifth Installment: An IMF study team is scheduled to visit Nepal in the upcoming month of Kartik to review and approve the fifth installment.

IMF's Condition and Nepal's Response:

According to the IMF's condition, the audit of the banks was to be completed by 2023. However, due to delays in starting the process, the IMF warned of halting the disbursement of the fourth installment. After NRB initiated the process, Nepal received the fourth installment.

Nepal Rastra Bank plans to engage in cooperation and dialogue with the IMF, proceed with a new process, and appeal to continue the ECF. This is expected to contribute to Nepal's economic stability and bring improvements in the banking sector.