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Kathmandu, Feb 22: Nepal has moved closer to receiving additional financial assistance of about Rs 6 billion after officials from the International Monetary Fund and the Government of Nepal reached a staff-level agreement on the seventh and final review of the Extended Credit Facility.

According to the IMF, the understanding was reached during a visit to Kathmandu from February 6 to 20 by a mission led by the mission chief of Nepal, Sarwat Jahan.

Once approved by the IMF Executive Board, Nepal will gain access to about 43.2 million US dollars, roughly Rs 6 billion, in concessional financing.

Under the Extended Credit Facility program launched nearly four years ago, Nepal has been carrying out various economic reforms. In total, the country is set to receive 395.9 million US dollars, about Rs 57 billion at the current exchange rate.

Following Executive Board approval of this final review, Nepal will be able to draw the full amount of committed financial support.

The IMF said the Jahan-led team also held discussions for the 2026 Article IV Consultation alongside the ECF review.

In a statement issued after the mission, Jahan noted that Nepal has made progress in implementing the ECF program despite difficult domestic conditions. Program performance remains satisfactory. All quantitative performance targets due by mid-July 2025 were met, except for a marginal shortfall in the indicative target related to social sector grants.

Key reforms completed under the seventh review include the implementation of the customs compliance improvement strategy, the completion of on-site inspections under the Loan Portfolio Review of banks, and the alignment of asset classification regulations with Basel Committee standards for banking supervision.

The statement also noted agreement to incorporate key recommendations from the IMF’s 2021 safeguards assessment and the 2023 Financial Sector Stability Review into the draft amendment of the Nepal Rastra Bank Act. The IMF described tabling the amendment bill in Parliament as an essential reform step.

The IMF projects Nepal’s economic growth at only 3 to 3.5 percent in the current fiscal year, below the country’s potential. It cited economic uncertainty, weak private sector confidence, and slow capital spending as major drags.

Still, the IMF said peaceful political transition and policies to boost capital expenditure could lay the foundation for inclusive growth ahead. It warned that damage from protests and economic uncertainty has hurt business activity and private sector confidence, delaying investment decisions.

The fund also flagged rising risks in Nepal’s financial sector. Non- performing loans in banks and financial institutions reached 5.4 percent by January 2026 and could climb further based on the recent portfolio review.

The IMF called for further reforms to strengthen bank balance sheets and enhance the regulatory capacity of Nepal Rastra Bank. It also noted that savings and credit cooperatives remain under stress.

Looking ahead, the IMF expects a stable political environment to help restore private sector confidence, lift investment and consumption, and support domestic demand. Still, it cautioned that political uncertainty, weak capital project execution, financial sector vulnerabilities, and slowing remittances pose notable risks.

The IMF stressed the importance of advancing the Nepal Rastra Bank Act amendment to strengthen central bank autonomy and governance. It also urged adherence to international practices in the planned Asset Management Company.

The fund recommended stronger domestic revenue mobilization to finance development spending and called for effective implementation of the anti-money laundering framework to help Nepal exit the Financial Action Task Force grey list.

During the visit, the IMF team met Finance Minister Rameshwar Prasad Khanal, National Planning Commission Vice Chair Dr Prakash Kumar Shrestha, and Nepal Rastra Bank Governor Dr Bishwanath Paudel, among others.

People’s News Monitoring Service