The International Monetary Fund published an end-of-mission statement on Nepal reporting a staff-level agreement to complete the seventh and final review under the Extended Credit Facility arrangement and concluding the 2026 Article IV consultation. Subject to IMF Executive Board approval, completion of the review would provide access to SDR 31.32 million (about USD 43.2 million), bringing total disbursements under the arrangement to SDR 282.42 million (about USD 384.4 million). Program performance was assessed as satisfactory, with all quantitative performance targets for mid-July 2025 met except the indicative target on child welfare grants, which was missed marginally. Completed reforms cited for the review included adoption of a Customs Compliance Improvement Strategy, completion of the onsite inspection for the Loan Portfolio Review, and realignment of asset classification regulations with Basel Committee on Bank Supervision guidelines; agreement was also reached on draft Nepal Rastra Bank Act amendments incorporating recommendations from the IMF’s 2021 Safeguard Assessment and 2023 Financial Sector Stability Report, with submission to Parliament described as critical. The statement projects FY2025/26 growth at 3 to 3.5 percent and notes low inflation (2.4 percent year-on-year in January 2026) alongside a strengthening external position, while flagging intensifying financial-sector vulnerabilities, including financial-sector non-performing loans at 5.4 percent in January 2026 and expected upward revision following the Loan Portfolio Review, plus continued strain in savings and credit cooperatives. IMF staff will prepare a report, subject to management approval, for the Executive Board’s discussion and decision on the review. The statement also points to follow-on work from the Loan Portfolio Review to strengthen bank balance sheets and supervision, and to the need to advance the central bank law amendments and implement measures on loan classification, provisioning, non-performing loan recoveries, the planned Asset Management Company, and the anti-money laundering framework linked to Nepal’s exit from the FATF grey list.
International Monetary Fund 2026-02-20
International Monetary Fund reaches staff-level agreement on Nepal’s final Extended Credit Facility review with USD 43.2 million disbursement pending Board approval
The International Monetary Fund (IMF) announced a staff-level agreement with Nepal to complete the final review under the Extended Credit Facility, pending Executive Board approval, unlocking SDR 31.32 million (USD 43.2 million). The review highlighted satisfactory program performance, with most targets met, and emphasized the need for legislative amendments and financial sector reforms. The statement projects FY2025/26 growth at 3 to 3.5 percent, low inflation, and a strengthening external position, while noting financial-sector vulnerabilities, including rising non-performing loans.