IMF mission concludes Kathmandu visit

An International Monetary Fund (IMF) mission concluded Kathmandu visit that was intended to assist in designing a three-year macroeconomic programme in support of the IMF under the Extended Credit Facility (ECF).
The mission led by John Nelmes, deputy Division Chief in the Asia and Pacific Department, was in the Valley for 15 days since September 21 to October 5.
The authorities’ programme would build upon reforms initiated earlier this year that were supported by the IMF’s Rapid Credit Facility (RCF), with the aim of underpinning economic growth and sustained poverty reduction, said the central bank. "It would focus on addressing financial sector weaknesses and on restoring a strong Balance of Payments (BoP) to boost foreign exchange reserves. Nepal has been witnessing a BoP deficit since last fiscal year," according to the central bank.
On May 28, the Executive Board of the IMF had approved a disbursement of an amount equivalent to SDR 28.52 million (about $42.05 million) under the RCF for Nepal to help address the economic impact of the global economic crisis.
"Nepal is experiencing a significant decline in exports, a sharp slowdown in remittances 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 IMF that provided the RCF for Nepal aiming at addressing external and financial risks and helping catalyze possible donor support.
The RCF, which provides a rapid and flexible financial assistance for low-income countries that face an urgent BoP need, does not require any explicit programme-based conditionality or review, but economic policies are expected to address the underlying balance of payments difficulties and support policy objectives including macroeconomic stability and poverty reduction. Financing under the RCF carries a zero interest rate, has a grace period of five-and-a-half years, and a final maturity of 10 years.
The IMF mission and government authorities discussed monetary, fiscal, and financial sector policies that would help ease the BoP deficit that is at Rs 2.62 billion by the end of fiscal year 2009-10 from around Rs 25 billion in the mid-2009-10.
The mission and the authorities agreed to continue to discuss during the annual meeting of the IMF-WB in Washington on October 8-9.
The next IMF mission mission to Nepal is scheduled for early 2011, according to the central bank.
Meanwhile, central bank governor Dr Yubraj Khatiwada left today to take part in the annual meeting of World Bank (WB) and International Monetary Fund (IMF) scheduled for October 8-10. The WB-IMF meeting will discuss on post-economic crisis impact on global economy. The governor will also take part in the meeting of SAARC governors and SAARC Finace -- a body of SAARC finance secretary -- scheduled for October 10.