Writing a letter to IMF in January, Finance Minister Surendra Pandey requested IMF to send a team to study out the problems seen in the economy and assess the situation. Pandey has even expressed eagerness to join IMF loans program so that the country could access financial assistance in case of need. [break]
Nepal´s economy has suddenly entered into a critical phase after the country witnessed a sharp drop in remittance growth rate. This has ballooned country´s balance of payment (BoP) deficit, depleted foreign currency reserve and worsened liquidity in the market.
If not addressed now, the government fears the problems will steer the country into deeper economic crisis and the government will need prompt external support to bail out the economy. In such a situation, IMF can be of great help. Hence, this letter marks an initiation of process by the government to seek that support, said an official.
“It also shows that the government is sensitive towards ongoing problems and is serious toward averting the looming crisis,” said Nara Bahadur Thapa, Nepali representative at IMF in Washington DC.
Nepal had discussed on joining IMF loans programs like Poverty Reduction Growth Facility (PRGF) of the past, which expired in 2007, during the annual meeting of IMF and the World Bank Group in Istanbul, Turkey a few months ago. It had mainly expressed willingness to join Extended Credit Facility (ECF). Under it, Nepal can secure loans to mitigate crisis at times of need. The volume of loans is fixed by the IMF, depending on the severity of the problem. However, formal step to actually join the program was never taken.
After key indicators showed signs of problems in economy, FM Pandey has raised the issue yet again in the letter.
Thapa informed myrepublica.com that the IMF has also responded to the government´s call. “The IMF mission (article 4) that assesses country´s economic situation will discuss the matter with the government soon,” he said.
The mission is scheduled to visit Nepal later this month.
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