KATHMANDU, May 2: The International Monetary Fund (IMF) will be providing US $52.80 million (equivalent to Rs 6.90 billion) under its Extended Credit Facility (ECF) to Nepal.
The IMF has decided to provide the aforementioned amount in the second installment of the ECF, which was put on hold for about a year. According to the IMF, its board meeting held in the USA on Monday approved providing the second installment of the package.
In January 2022, the IMF approved a US $ 398.5 million loan under the ECF for Nepal. The 38-month financing package was provided to Nepal to mitigate the Covid pandemic’s impact on health and economic activity, protect vulnerable groups, preserve macroeconomic and financial stability, and support sustained growth and poverty reduction.
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Of the amount, Nepal has already received $ 110 million as the first installment. As per the agreement, the IMF was supposed to provide around $ 55 million in the second disbursement. But the international organization, showing the cause that Nepal imposed import restriction policies, had been dilly dallying to disburse the amount in the second breakdown.
Citing the depleting foreign currency reserves, Nepal Rastra Bank (NRB) had imposed a 10-month long import restriction measure, which was lifted last December. Dissatisfied with the NRB policy, the IMF had been pressurizing the central bank to annul the decision.
Under the ECF, the IMF provides financial assistance to countries with protracted balance of payments problems. Following the Russia-Ukraine war that affected the global supply system causing prices to soar, Nepal went under chronic current account deficits that took a toll on the foreign currency exchange reserves. Due to this reason, Nepal has sought the credit facility from the IMF.
Meanwhile, the IMF has praised the government’s move to implement austerity measures amid the low revenue collection. However, the international organization has questioned the low loan repayment capacity of the borrowers mainly due to the exorbitant rate of interest charged by the banks.
