The International Monetary Fund has completed the on-site review of Nepal for the sixth tranche under the Extended Credit Facility (ECF). A team of the fund that came to Nepal last week has completed the evaluation review for the sixth installment. An IMF team led by Sarwat Jahan was in Kathmandu from May 26 to June 10 for on-site assessment.

After the report prepared by the team is approved by the management and executive committee of the IMF, Nepal will receive 40.27 million US dollars (about Rs. 5 billion) for the sixth tranche. The IMF has agreed to give a total of Rs 49 billion extended credit facility (ECF) to Nepal under this facility. 

IMF is going to provide this facility for the reform of Nepal's financial sector and budgetary system. In the past, Nepal's foreign exchange reserves were decreasing at a high rate and the current account was in deficit, but the government had agreed to take an extended credit facility with the IMF in order to manage it. According to this, the amount for five installments has been received, while the sixth installment has now been assessed on the spot.  For the

credit facilities, the IMF had set conditions such as that Nepal should not ban imports, that the big 10 commercial banks should be audited by independent auditors, and that credit classification should be made effective and according to international standards. According to the same conditions, the National Bank has already started the process of selecting companies to audit 10 big banks. A writ has been filed in the court raising questions about the appraiser company selected in the first stage. 

Under this cooperation, there is a program to strengthen the regulation and supervision of the financial sector and maintain financial stability, to monitor the impact of Covid-19 on the quality of banks' assets, and to restructure loans to commercial institutions that have potential but lack capital in the short term.

The IMF team has said that the economic activity in Nepal has started to improve, the construction and manufacturing sector has started to return to the rhythm and the hydropower capacity is increasing. The fund argues that the economic impact of the floods that occurred last September will be somewhat reduced as agriculture will improve. 

In the current financial year 2081/82, the economic growth rate of the country is projected to be 4 percent by the IMF. Last March, the IMF forecast that the economic growth rate in the current fiscal year 2081/82 would be 4.2 percent. As the problems seen in the economy have not yet been resolved, the IMF forecast that the economic growth will be around four percent. 

Bad loans in banks are still high (5.2 percent) and there is no improvement in cooperatives and other sectors, the IMF has mentioned. In order to improve the bad loans of banks, it has been mentioned that an asset management company should be established while being careful about the risks inherent in it. The IMF has pointed out that the financial situation of savings and credit cooperatives is still challenging.