Kathmandu: Nepal has faced several challenging years in the face of repeated shocks. The country was recovering from the pandemic when it was hit by natural disasters, political transitions, and external shocks. Despite this, IMF stated that the nation completed its first IMF-supported arrangement in nearly two decades carrying out important reforms.
Nepal’s economy is much more stable in the current days than it was when the reform effort began in 2022. According to Sarwar Jahan, Nepal Mission Chief, inflation has fallen sharply, international reserves have increased, and the primary fiscal deficit is lower. The nation has also improved some of the institutions that support economic policymaking. He said, “This progress is notable because Nepal endured several government transitions, natural disasters, and global shocks over the course of the program.”
Jahan further emphasized that inflation fell from an average of 7.7 percent in fiscal year 2022-23 to 1.7 percent in the first half of fiscal year 2025-26. International reserves rose from about nine months of import cover to more than twelve, a meaningful cushion. Public finances also improved, with the budget gap narrowing sharply and debt kept at low risk of distress. “Lower inflation protects people’s purchasing power, larger reserves guard against currency and trade pressures, and healthier public finances give the government a buffer to respond when the next crisis hits,” he said.
Shocks have tested the economy repeatedly with earthquakes, several floods, and social unrest adding more uncertainty each year. Each shock interrupted the recovery and weighed heavily on job creation. Jahan emphasized, “The experience underlined a hard lesson: resilience must be built in advance. Countries that strengthen institutions and rebuild buffers before a crisis are far better placed to absorb the next one.”
Jahan also stated that several reforms have had lasting impact. Nepal modernized how its central bank conducts monetary policy and improved oversight of the financial sector, including stronger bank supervision and review of loan quality. Fiscal transparency has been increased by publishing financial statements of state-owned enterprises, developed a strategy to mobilize revenues, and strengthened how public investment is planned and managed. Nepal has also improved governance by upgrading its anti-money-laundering law and moving to strengthen the central bank’s legal framework and accountability.
There are still several priorities that need to be taken as Nepal still needs to foster higher private investment and generate more jobs. Parts of the financial system remain vulnerable, including savings and credit cooperatives that serve many people. Deeper institutional reforms are also ongoing and reform momentum needs to continue. Jahan said, “Completing the IMF-supported program is an important milestone, but reforms will continue. Priorities include strengthening the financial sector, improving social protection, and creating the conditions for stronger, more inclusive growth. Nepal has demonstrated its commitment to implementing critical reforms despite a difficult environment.”
