The International Monetary Fund (IMF) has given a positive outlook for Nepal’s economy. In its sixth review under the Extended Credit Facility (ECF), the IMF predicts that Nepal’s GDP will grow by 5.2 percent in the 2025/26 fiscal year.
Along with the review, the IMF approved an additional 31.4 million SDR (around 43 million USD) in support for Nepal. Since the program began in 2022, Nepal has received about 341 million USD under this facility.
Progress Amid Challenges
Despite political instability and social tensions, Nepal has made steady progress in stabilizing its economy. The IMF notes that the economy grew by 4.3 percent in 2024/25 and is expected to reach 5.2 percent next year.
Growth will mainly come from construction, industry, hydropower expansion, and higher agricultural output. The IMF said Nepal’s reform program is helping the economy recover even amid global uncertainty and domestic political challenges.
Inflation and Foreign Reserves
Inflation is expected to stay within the Nepal Rastra Bank’s target of 5 percent. Although imports are rising, the country’s foreign currency reserves can cover nearly ten months of imports.
Remittances from Nepalis working abroad and income from tourism are strengthening Nepal’s foreign exchange position further.
Budget and Investment Focus
The IMF advised that the government’s next budget should focus on structural reforms and development. It recommended increasing capital expenditure and improving revenue collection.
The report also suggested reviewing tax exemptions and incentives, improving the social security system, and expanding child grants.
Economic Risks Ahead
While the medium-term outlook is positive, the IMF warned that political instability, weaknesses in the financial sector, and natural disasters could pose risks.
It urged immediate action on rising non-performing loans and issues in cooperative institutions. Continuous efforts to update the Nepal Rastra Bank Act, strengthen anti-money laundering measures, and fight corruption are also recommended.
