Nepal requests World Bank to continue Development Policy Credit-2

Nepal has asked World Bank (WB) to continue loan assistance under Development Policy Credit-2 programme within the current fiscal year.

"As the Development Policy Credit-1 has helped Nepal, the continuation of the programme under budgetary support will make the government easier to prepare budget," said finance secretary Shanta Raj Subedi during a meeting with visiting World Bank mission in the capital here today.

The government will get $70 million (around Rs 7 billion) in loan assistance under Development Policy Credit-2 for the next fiscal year’s budget.

The government and World Bank have been working on budgetary support for Nepal worth $100 million for the last three years.

Last year, the World Bank provided $30 million in credit under Development Policy Credit to help accelerate financial sector reform programme aimed at reducing the banking sector's vulnerability and increase transparency.

The $30 million that came under Development Policy Credit-2 programme was incorporated in the current fiscal year's budget. The $70 million is the second tranche of the budgetary support.

The World Bank mission led by Gabi G Afram said that negotiations for Development Policy Credit-2 can be finalised in October or early November, though the Finance Ministry wants to complete the negotiation earlier to plan the resource distribution for the budget for nest fiscal year 2014-15.

Development Policy Credit comes as financial sector stability credit for financial sector reform programme. The Development Policy Credit-1 has supported Medium Term Financial Sector Reforms Programme that has prepared a long-term financial sector reform strategy, increased financial access and helped recapitalise Nepal Rastra Bank and Rastriya Banijya Bank.

The World Bank will take stock of past performances of the government before committing its continuation.

The Finance Ministry claimed that the reform is on track as it is amending the Nepal Rastra Bank Act and Banks and Financial Institutions Act (Bafia) – both of which are currently in Parliament – apart from drafting Deposit Insurance Act.

Likewise, capitalisation of Nepal Bank and Rastriya Banijya Bank is also underway. Nepal Bank has been selling its assets while Rastriya Banijya Bank is floating shares to increase its capital base, according to the ministry.