Kathmandu, June 11, 2025 – Nepal is on the cusp of unlocking $42.7 million in fresh funding from the International Monetary Fund (IMF) following a staff-level agreement on the sixth review of its Extended Credit Facility (ECF) program. The deal, reached after intensive talks in Kathmandu, signals a steady recovery for Nepal’s economy—but challenges remain.

Looking ahead, growth is projected to strengthen in FY2025/26, while inflation is expected to remain contained within the NRB’s tolerance level. However, the outlook is subject to important downside risks, including under-execution of capital projects, an increase in financial sector vulnerabilities, elevated global trade tensions and uncertainty, and potential disruptions to domestic policy continuity and reform implementation

A Milestone in Economic Recovery

From May 26 to June 10, 2025, IMF team leader Ms. Sarwat Jahan collaborated with Nepali officials, including Deputy Prime Minister Bishnu Prasad Paudel and Nepal Rastra Bank (NRB) Governor Dr. Biswo Nath Poudel. The agreement, pending IMF Executive Board approval, will bring total IMF support to $331.8 million.

  • Growth Outlook: FY2024/25 growth exceeded 4%, with FY2025/26 projected to strengthen, driven by construction, hydropower, and a solid harvest.
  • Inflation Check: Down to 3.4% in April 2025 after flood-related spikes.
  • External Gains: Exports, remittances, and tourism outpace import recovery.

[Insert Image: IMF team meeting with Nepali officials, Kathmandu skyline in background]

Progress and Pledges

Nepal has met most program targets, with standout reforms including a tax expenditure report and updated National Project Bank guidelines. The NRB is finalizing an independent consultant for a critical loan portfolio review (LPR), a prerequisite for the funds’ release.

  • Financial Sector: Non-performing loans hit 5.2%, while savings and credit cooperatives (SACCOs) face ongoing struggles.
  • Policy Moves: The FY2025/26 budget supports fiscal stability and private sector growth, including school meal expansions.

Risks on the Horizon

Despite the positive trends, risks loom large:

  • Under-execution of capital projects.
  • Rising financial vulnerabilities.
  • Global trade tensions and domestic policy disruptions.

The IMF emphasizes timely LPR completion and cautious steps toward an Asset Management Company, tied to a stronger debt recovery framework.

What’s Next?

The agreement hinges on IMF Board approval, expected soon. This funding could catalyze further aid, bolstering Nepal’s path to stability. Stay tuned for updates!

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