IMF urges Nepal to orient fiscal policy toward facilitating quick spending on reconstruction

Published On: April 22, 2017 11:08 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, April 22: The International Monetary Fund (IMF) has said the fiscal policy of Nepal should be oriented toward facilitating spending on post-earthquake reconstruction and infrastructure as quickly as possible. 

Addressing a press briefing of its Asia Pacific department held at IMF Headquarters in Washington, DC, on Friday during the 2017 Spring Meetings of the World Bank and the International Monetary Fund, IMF Deputy Director at the Asia and Pacific Department Kenneth Kang said IMF is seeing signs that Nepal has been enjoying a broad-based recovery. 

On Tuesday, IMF, through its World Economic Outlook, made a 5.5 percent economic growth forecast for Nepal for Fiscal Year 2016/17 compared to 0.6 percent economic growth the previous year. But as IMF forecasts are considered by economists to be conservative estimates, the government is likely to achieve its 6 percent economic growth target for Fiscal Year 2016/17. 

IMF’s Kenneth Kang said ‘there is a strong case for structural reforms, both to unlock the economy’s potential, and to diversify its export base’ for the country to maintain sustainable economic growth.  

The IMF official also said Nepal needed to strengthen its infrastructure system -- particularly for transport -- as a way to improve its domestic business environment. 
“We have projected a growth of around 5.5 percent for both this year and next one following a slowdown caused both by the 2015-earthquakes and the trade disruptions along its southern border,” he said.

According to Kang, Nepal needs to tighten its monetary policy in order to better support the exchange-rate pay and to improve competitiveness by closing the inflation gap with India. IMF also expressed concern about the recent rapid growth in credit. 

 “And there is a need to accelerate particular financial sector reforms and supervision through better loan classification and provisioning practices,” he said. “These will all help produce robust growth and give the country the buffers it needs to adjust smoothly to these shocks,” he added.

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