KATHMANDU, June 9: The International Monetary Fund (IMF) has expressed its concern over the slow progress of Nepal’s government in a number of economic and financial reform areas of the country.

The IMF delegation led by Tidian Kinda, deputy division chief of the IMF’s Asia-Pacific Department, following a visit to the Himalayan nation, pointed out a number of areas in which progress is seen slow. The IMF delegation has suggested amendment to the Nepal Rastra Bank (NRB) Act and recommended international audit reports on the credit given by a number of banks and financial and independent audit of the NRB.

The IMF has been recommending the government to make the NRB an autonomous body. For this purpose, the watchdog of the monetary system of its member countries has been pressing to remove the representatives of the Ministry of Finance from the NRB board. Likewise, the IMF has sought the need to conduct the audit of financial transactions of the NRB by an external authority and scrutiny of the loans provided by 10 big banks to their clients. 

The additional reform measures that the IMF has pointed out include detailed report making of utilization of funds generated from the tax collection, scrutiny of the financial risk in the government system, selection procedure in the national project bank and formulation and implementation of guidelines related to the development and prioritization, among others.

“Provided the project bank is formed and expenses are allocated in the development work prioritized by the project bank, it will help check the rampant spending of the funds by the political leaders. It will also aid in making the budget transparent, while it ensures effective expenditure,” said the IMF in its press statement.

The government has joined hands with the IMF to make its reform measures in financial and economic sectors result-oriented. Now, the government has been working on a number of policy measures that include formulating strategy on Inland Revenue mobilization, work plan to increase capital expenditure allocated by the budget and financial transparency, among others.  

The IMF team in its recent visit has confirmed the fourth installment under the Extended Credit Facility (ECF) to Nepal. During the COVID-19 pandemic, the IMF Executive Board approved a concessional loan of USD 398.8 million to Nepal under the ECF, scheduled over four years starting from mid-January 2022. The third installment has already been disbursed, with the final installment of Rs 5.59 billion (approximately USD 42 million) still pending.

The IMF has been providing financial assistance to various countries through the ECF in the areas of structural and policy reforms and medium-term balance of payments, Inland Revenue mobilization, public investment management and financial risk reduction. Nepal has been spending the loan received through the ECF under the heading of budgetary assistance.