Nepal: Staff Report for the 2023 Article IV Consultation, First and Second Reviews Under the Extended Credit Facility Arrangement, Requests for Waivers of Nonobservance of Performance Criteria, Extension of the Arrangement, and Rephasing of Disbursements-Press Release; Staff Report; and Statement by the Executive Director for Nepal

This paper presents Nepal’s the 2023 Article IV Consultation, First and Second Reviews under the Extended Credit Facility (ECF) Arrangement, Requests for Waivers of Nonobservance of Performance Criteria, Extension of the Arrangement, and Rephasing of Disbursements. Completion of the first and second reviews under the ECF provides Nepal with access to SDR 39.20 million. Following a strong post-pandemic recovery, external shocks and necessary policy adjustment led to a softening of gross domestic product growth. The much-needed monetary policy tightening helped stabilize the external position and lower inflation, while the recent mid-year budget review is expected to address near-term fiscal risks. Sustainable medium-term growth will require preserving macroeconomic stability and fiscal reforms in line with debt sustainability, advancing reforms on banking regulations and supervision, reducing the cost of doing business and barriers to foreign direct investment, and enhancing governance and the social safety net.