NFA (KATHMANDU, 14 January 2022) – The International Monetary Fund (IMF) has approved a $395.9 million (around Rs47 billion) extended credit facility for Nepal for Covid-19 response in mitigating the pandemic’s impact on health and economic activity, protecting vulnerable groups, preserving macroeconomic and financial stability, and supporting sustained growth and poverty reduction.
The programme will help fill financing gaps and will catalyse additional financing from Nepal’s development partners, the IMF said in a press statement on Thursday.
Approval of the extended credit facility arrangement enables immediate disbursement of $110 million, usable for budget financing. This follows fund emergency support to Nepal in May 2020 under the rapid credit facility equivalent to $214 million at the time of approval.
The Covid-19 pandemic is taking a heavy toll on Nepal’s economy. From April to July 2021, Nepal suffered a devastating second wave of Covid-19, interrupting a gradual recovery in economic activity. Nepal’s GDP contracted 2.1 percent in fiscal year 2019-20.
The World Bank in its Global Economic Prospects report published on Wednesday said Nepal’s economy may grow 3.9 percent this fiscal year, ending mid-July 2022, unchanged from its June 2021 outlook.
The IMF said that collapse of the tourism and service sectors, which are key drivers for growth, will take time to recover. After a sharp drop in 2020, imports have rapidly grown, fuelling a large current account deficit [8.3 percent of GDP in 2020-21].