Nepal gets $42 million IMF loan

The International Monetary Fund (IMF) approved an immediate loan of $42.05 million to help address Nepal's economic troubles.
The loan was approved under the Washington-based fund's rapid credit facility, which provides swift and flexible financial assistance for low-income countries that face an urgent balance of payments need, according to the washington-based lending agency.
The move came as the main political parties yesterday agreed to extend Constituent Assembly's (CA) term, in a dramatic eleventh-hour deal to avert political crisis. The Maoist party said the leaders had agreed to form a new national consensus government as part of the deal.
Under the deal reached late hours yesterday, Prime Minister Madhav Kumar Nepal had agreed to resign within a week.
The IMF said in a statement that the zero interest rate loan did not require any explicit programme-based conditionality or review.
However, it said, economic policies were expected to address underlying balance of payments (BoP) difficulties and support macroeconomic stability and poverty reduction.
The country is experiencing a significant decline in exports widening the trade deficit, and a worsening of economic confidence, which has contributed to a large deterioration in the current account balance and a decline in international reserves as well as a liquidity crunch in the banking sector.
According to the central bank's first nine month's report, the country has recorded a BoP deficit of Rs 22.1 billion and total trade deficit has expanded by 58.9 per cent to Rs 238.47 billion. Similarly, the gross foreign exchange reserves have dropped by 15.8 per cent to Rs 235.75 billion.
"The government's policy programme, supported by the IMF, is aimed at addressing these risks and stabilising international reserves," said IMF deputy managing director Naoyuki Shinohara. "At the core of the programme are a tight monetary and fiscal policy stance to support the exchange rate peg, which remains Nepal’s anchor for macroeconomic stability, and efforts to improve financial sector soundness."