Kathmandu: The International Monetary Fund (IMF) has called on Nepalese authorities to enhance monitoring of banks as the country works to recover from its economic slowdown. This recommendation follows a visit by an IMF team led by Sarwat Jahan on September 11-12, aimed at assessing recent macroeconomic developments and the implementation of programs supported by the Extended Credit Facility.
In a press release, the IMF emphasized the need for government action to closely oversee the largest banks in Nepal while addressing ongoing challenges in the cooperative sector. The statement noted, “As banks deal with elevated non-performing loans and capital constraints, continued vigilance is necessary, including strengthening regulation and completing the loan portfolio review of the 10 largest banks. Addressing vulnerabilities among the savings and credit cooperatives remains a priority.”
The IMF has been urging Nepal’s central bank, the Nepal Rastra Bank (NRB), to conduct a thorough examination of the credit quality issued by major banks. While the NRB had initiated the process to appoint an international auditor for this purpose, the central bank recently canceled the tender.
Despite these challenges, the IMF expressed optimism about signs of recovery in Nepal’s economy. The report highlighted positive trends such as an increase in imports, improving tax collections, and rising public investment. “Credit growth is recovering while remaining appropriately below nominal GDP growth,” the statement added.
The IMF also welcomed recent amendments to the Anti-Money Laundering Act but urged the completion of the NRB’s external audit and amendments to the NRB Act. The organization believes that these steps, along with increased transparency in public enterprises, will enhance governance and accountability. “The Investment Facilitation Act will bolster Nepal’s investment climate,” the IMF noted.
During their visit, IMF team members engaged in discussions with key officials, including Deputy Prime Minister and Minister for Finance Bishnu Prasad Paudel, NRB Governor Maha Prasad Adhikari, and National Planning Commission Vice-Chairman Shiva Raj Adhikari, as well as representatives from the private sector and development partners. The IMF’s report concluded that Nepal’s economy is showing early signs of recovery, marking a positive outlook for the nation’s financial future.