IMF Projects Nepal’s Economic Growth To Be 1 Percent

May 15, 2020 | Investopaper

The International Monetary Fund (IMF) has projected that Nepal’s economic growth will average 1 percent this year due to the Corona infection. IMF said in a statement that it had revised its earlier projection and hinted that the growth rate will be even lower as the lockdown and its effects continue.

IMF made the projection based on the data for the first nine months of the current fiscal year. According to the IMF’s Article Four 2020, this year’s economic growth rate was projected to be around 6.5 percent. A few weeks ago, ‘World Outlook’ projected the growth rate to be 2.5 percent. The projection by IMF is lower than Nepal’s own. The Central Statistics Department had initially estimated Nepal’s growth rate to be 2.27 percent. The government had set a target of 8.5 percent economic growth for the current fiscal year.

According to the IMF, Nepal’s balance of payments will remain negative at 3 percent in the current fiscal year. An earlier Article Four report did not say that the country’s balance of payments would be negative. Stating that the balance of payments is likely to come under pressure, the government received a special zero-interest rate Rapid Credit Facility (RCF) facility worth about Rs 26 billion from the IMF. The IMF has projected the balance of payments to be negative as soon as the same facility is provided. Nepal’s request for RCF was approved by the IMF Executive Committee last Wednesday.

Nepal has received loan facility equal to SDR 156.9 million for this year. For the first time since 2015, Nepal has received RCF facility. Generally, loans taken through RCF and ECF are not available for budgetary expenditure. But now the IMF has provided the facility to be included in the budgetary expenditure.

Despite IMF’s projection that the country’s balance of payments will go into deficit, Nepal Rastra Bank has rejected it. IMF has said that due to Corona, the inflow of remittances will decrease and the growth rate of the tourism sector will decrease significantly.


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