Due to the ongoing crisis, the foreign remittances to Nepal have dropped considerably, tourist influx collapsed and local economic activities have taken a worst-hit.

This, in turn, is substantially deteriorating the nation’s GDP growth, the balance of payments and fiscal positions.

In need of the hour, the International Monetary Fund (IMF) has come forward to lend financial support to Nepal during the COVID-19 crisis.

The IMF has pledged to contribute USD 214 million to the Nepali Government to fill the urgent balance of payments and fiscal needs incited by the contagion.

The government has increased health spending to provide additional incentives and insurance to all COVID-19 medics, procure essential medical supplies, and set up quarantine centers and temporary hospitals.

ALSO READ: UNFPA Donates 1,200 PPE Kits to Nepal

It also initiated steps to support those who lost employment, ensure adequate liquidity in the financial system and provide daily food rations.

At this juncture, the IMF financial support is set to provide some relief to the Nepali Government.

So far, Nepal has reported 99 coronavirus positive cases and zero death cases. Currently, 77 patients are undergoing treatment, while 22 have already recovered.

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The IMF Executive Board has approved the first batch of countries to receive grants to cover their IMF debt obligations for the first six months under its Catastrophe Containment and Relief Trust (CCRT).

“This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts,” said IMF Managing Director Kristalina Georgieva.

Photo: IMF MD Kristalina Georgieva

1. Afghanistan
2. Benin
3. Burkina
4. Central African Republic
5. Chad
6. Comoros Haiti
7. Faso
8. Gambia
9. Guinea
10. Guinea-Bissau
11. Liberia
12. Madagascar
13. Malawi
14. Mali
15. Mozambique
16. Nepal
17. Niger
18. Rwanda
19. São Tomé and Príncipe
20. Sierra Leone
21. Solomon Islands
22. Tajikistan
23. The Democratic Republic of Congo
24. Togo
25. Yemen

According to the IMF MD Kristalina, the CCRT has USD 500 million that includes a contribution from-

• Britain – USD 185 million
• Japan – USD 100 million
• China – Undisclosed
• Netherlands – Undisclosed

Around USD 215 million will be granted for the first 25 countries over the next six months with a possible extension period of 2 years.

However, the IMF is striving to raise a total of USD 1.4 billion and requested the other donor countries to contribute to the CCRT to provide additional financial relief to poor countries.

“The grants would help the IMF’s poorest members, including the Central African Republic, which has only three critical-care unit beds for a population of 5 million,” said Eric LeCompte, Jubilee USA Network Executive Director.

The IMF and the World Bank urged the rich countries to stop collecting debt payments from poor countries from May 1, 2020 through June 2021.

Earlier, the World bank promised to contribute USD 160 billion in emergency aid to aid countries affected by coronavirus, including USD 14 billion in debt repayments from 76 poor countries to other nations.

So far, the coronavirus has affected 210 countries and territories around the world and infected 1,925,853 people while claiming 119,719 lives.

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However, WB’s growth projection is lower than Nepal’s economic growth rate in FY 2017-18.

In its flagship report ‘Global Economic Prospects’ released on January 08, 2019, the global authority observed that the country’s economic growth will slow down to 5.9 percent in the current fiscal as Nepal’s strong post-earthquake momentum is expected to be moderate.

According to the report, the reconstruction activity will be backed by infrastructure investment and consumption.

The report also projects a consistent 6 percent for the next three fiscal years.

Comparatively, WB said that Nepal achieved an estimated economic growth rate of 6.3 percent.

“Less favorable monsoons led to weakness in agricultural activity, but this was offset by a recovery in remittances and robust industrial sector growth, particularly for manufacturing activities,” said the WB report while speaking further about the country’s economic progress.

However, it is important to note that WB’s growth projection of 5.9 percent for the current fiscal is lower than the International Monetary Fund’s (IMF) December 2018-forecast of 6.5 percent.

Likewise, the Asian Development Bank (ADB) in its macroeconomic update in September 2018 predicted that the economic growth in FY 2018-19 will be likely 5.5 percent.

South Asian Region Economic Growth Rate

The Global Economic Projects report has projected the growth rate for South Asia to increase to 7.1 percent in 2019 from 6.9 percent in 2018.

The report states that over the medium term, robust domestic demand will continue to drive growth which is expected to bring about the estimated 7.1 percent.

“However, risks to the outlook are tilted down. On the domestic side, vulnerabilities are being exacerbated by fiscal slippages and rising inflation, and the possibility of delays in needed structural reforms to address weaknesses in the balance sheets of banks and non-financial corporate,” read the report.

As per WB’s report, key external risks including a further deterioration in current accounts and faster than expected tightening of global financing conditions.

The global authority is keeping a close watch on Nepal’s progress.

While there are several factors that influence a country’s growth, the World Bank continues to monitor and rank countries based on such factors including ‘ease of doing business’ among others.

Nepal was ranked 158^th in WB’s Ease of Doing Business report.

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The World Bank and International Monetary Fund (IMF) agreed to provide related monetary assistance to Nepal, during the WB annual meeting held at Bali, Indonesia.

Nepal Finance Ministry International Economic Cooperation Coordination (IECCD) Chief Shree Krishna Nepal and World Bank Nepal Country Director Qimiao Fan signed the agreement on October 10, 2018.

Nepal Finance Minister Dr Yubaraj Khatiwada and World Bank South Asia Region Vice Chairperson Hartwig Schafer were also present at the occasion.

Speaking at the occasion Nepal Finance Minister Dr Yubaraj Khatiwada appreciated WB’s support for the growth of various sectors such as infrastructure development, tourism development, education and health while hoping that WB would increase its support to Nepal in the future too.

World Bank South Asia Region Vice Chairperson Hartwig Schafer was also present at the occasion.

World Bank Aid for Nepal Aid
Recently, the World Bank approved a whooping Rs 100 million loan for the country’s energy sector. The grant aimed to support the energy sector for effective implementation of related policies and institutional measures. Additionally, it plays an important role in strengthening the financial viability of the Nepal Electrical Authority (NEA).

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