IMF holds talks with NRB governor before final ECF tranche

KATHMANDU: The International Monetary Fund (IMF) has begun discussions with Nepali authorities ahead of releasing the final tranche under the Extended Credit Facility (ECF) program, signaling a critical phase in Nepal’s economic reform process and future macroeconomic policy direction.

An IMF mission has arrived in Nepal to review progress made so far and assess pending commitments tied to the ECF-supported reform agenda. On Friday, the IMF team held talks with Nepal Rastra Bank (NRB) Governor Dr. Bishwanath Paudel.

The delegation will remain in Nepal for two weeks. This time, the IMF’s Article IV consultation team is also part of the mission, marking a shift from previous reviews where ECF and Article IV missions were conducted separately.

Nepal has already received six tranches under the ECF arrangement, which was approved to support financial stability, external sector reform, and structural economic adjustments. The program came with policy conditionalities aimed at strengthening the banking system, improving fiscal discipline, and reinforcing central bank governance.

NRB Act Amendment in Focus

One of the key pending commitments before the final disbursement is the amendment of the Nepal Rastra Bank Act, which has yet to be tabled in Parliament. During the meeting, the IMF team reportedly raised concerns about the delay. Governor Paudel assured the mission that the bill would soon move forward, citing Nepal’s political situation as a reason for the hold-up. The draft amendment has already been sent by NRB to the Ministry of Finance, but the ministry has not advanced it further.

The IMF has shown particular interest in ensuring NRB’s institutional autonomy, expressing reservations over provisions that allow the government to issue directives to the central bank. The new draft reportedly removes such clauses.

Funding and Program Performance

Including the sixth tranche, Nepal has received USD 341.2 million under the ECF. Despite political instability and global economic uncertainty, the IMF has noted that overall program implementation has been broadly satisfactory.

After completing discussions in Nepal, the IMF mission will submit a preliminary report to Finance Minister Rameshwar Khanal and Governor Paudel. A detailed review will then take place at IMF headquarters. Only after board approval will Nepal receive the final tranche, a process expected to take at least three months. With that, the current ECF program will formally conclude.

What Comes Next?

Sources say the IMF has also asked Governor Paudel about Nepal’s plans after the ECF program ends, indicating interest in a possible new engagement framework. This comes at a time when stakeholders argue that strict IMF conditionalities have made economic expansion challenging, even as the Fund signals willingness to continue supporting Nepal’s reform agenda.

The 36-month ECF program was launched when Nepal’s balance of payments pressure intensified. Under it, reforms were introduced in bank loan classification, credit investment practices, and external audits. The working capital loan guidelines issued by NRB became one of the most controversial measures, drawing strong opposition from the business community and leading to heavy criticism of former Governor Maha Prasad Adhikari.

As Nepal approaches the final stage of the IMF-supported program, attention now turns to whether a new arrangement will shape the country’s future economic policy, financial sector regulation, and external stability framework.