KATHMANDU, May 9: The executive board of the International Monetary Fund (IMF) approved a disbursement to Nepal under the Rapid Credit Facility (RCF) equivalent to SDR156.9 million (about US$214 million, 100 percent of quota) to help cover urgent balance of payments and fiscal needs stemming from the COVID-19 pandemic.
This is the 50th request approved by the IMF Executive Board for emergency financial assistance to help its member countries address the challenges posed by COVID-19, according to an IMF press statement.
The COVID-19 pandemic is having a severe impact on Nepal’s economy. During recent months, remittances have fallen considerably, tourist arrivals collapsed, and domestic activity has taken a hit amid social distancing measures."The IMF financial support will make a substantial contribution to filling immediate external and fiscal financing needs that have emerged due to COVID-19. It is also expected to catalyze additional support from development partners," IMF said in the statement.
The immediate priority of authorities in Nepal has been to deal with the human and economic impact of the COVID-19 pandemic. The authorities are increasing health spending, including by providing additional incentive pay and insurance coverage to all medical front-line personnel, importing additional medical supplies, and setting up quarantine centers and temporary hospitals.
They are also strengthening social assistance by providing those most vulnerable with daily food rations, subsidizing utility bills for low-usage customers, and taking steps to partially compensate those who suffer job loss. In addition, measures are being implemented to ensure adequate liquidity in the financial system and support continued access to credit.
Following the Executive Board discussion, Deputy Managing Director and Chair Tao Zhang said the global and domestic measures to contain the COVID-19 pandemic are severely affecting the Nepali economy, through their impact on remittances, tourism, and domestic activity.
"These have given rise to an urgent balance of payments need and a fiscal financing gap. Fund support under the Rapid Credit Facility, following the recent approval of debt service relief under the Fund’s CCRT, will help the authorities address immediate financing needs and catalyze additional support from other development partners," the statement quoted Tao as saying.
Deputy Management Director and Chair Tao said that the authorities in Nepal are taking proactive, well-targeted measures to address the human and economic impact of the pandemic, while preserving macroeconomic stability. Such measures include increasing health spending, strengthening social assistance to protect the most vulnerable, and providing bank liquidity and credit support.
“Additional assistance from development partners, beyond what had already been committed before the outbreak of the pandemic, is needed to close the remaining balance of payments gap and ease the fiscal situation. The authorities’ commitment to high standards of transparency and governance in the management of financial assistance is welcome," the statement quoted him as saying further.
Tao said the authorities should remain committed to policies that promote inclusive growth and resilience going beyond the immediate response to the external shock, while containing external pressures, protecting financial stability, and preserving fiscal sustainability. "Strengthening good governance and accountability would also be important,” he further said.