Nepal: Sixth Review Under the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Nepal

Nepal has, so far, been relatively insulated from recent global trade and aid-related disruptions given its small export sector. Economic activity has continued to gradually recover, underpinned by a rebound in construction and manufacturing, continued expansion of hydropower, and a good harvest that helped offset the impact of the September 2024 floods. Growth in FY2024/25 is estimated to reach 4.3 percent, although still below potential. Inflation is expected to remain within the Nepal Rastra Bank's target of about 5 percent. The external position has strengthened, with robust growth in exports, remittances, and tourism outpacing the recovery in imports. Despite improved growth, non-performing loans have continued to rise, eroding bank capital. The financial health of the savings and credit cooperatives remains challenging.

Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Budget planning and preparation, Credit, Crime, Expenditure, External debt, Financial institutions, Financial sector policy and analysis, Financial sector stability, Fiscal risks, Loans, Money, Public debt, Public financial management (PFM), Revenue administration

Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), Budget planning and preparation, Capital spending, Credit, Financial sector stability, Fiscal risks, Loans, Nonperforming loans