Nepal’s Cenbank governor sees no need for IMF loan as tourism revenue rises

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KATHMANDU, Aug 1 (Reuters) – Nepal sees no need to approach the International Monetary Fund (IMF) for a new loan as pressure on foreign exchange reserves eases after tourism picks up, Nepal said on Monday. governor of its central bank.

“Right now, we are focusing on demand management to reduce pressure on foreign (foreign) reserves,” Maha Prasad Adhikari, governor of Nepal Rastra Bank (NRB), told Reuters, noting that increased worker remittances and tourist arrivals provided a “silver lining” for the economy.

Tourism revenue more than tripled to 25.52 billion Nepalese rupees ($201.8 million) in the 11 months to mid-June, compared with the same period a year earlier, although that they are still well below pre-pandemic levels.

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Remittances from foreign workers, meanwhile, rose 1.5% to $7.5 billion over the same period, according to government data.

“These developments are expected to help ease the pressure from the external sector in a few months,” Adhikari said when asked about the possibility of applying for an additional loan from the IMF.

His comments came after Finance Minister Janardan Sharma was reinstated on Sunday, after a parliamentary inquiry found no evidence that he was involved in illegal budget changes. Read more

Many South Asian economies, including Sri Lanka, Pakistan and Bangladesh, have sought IMF assistance to reduce the risk of external defaults following a spike in fuel and grain prices. imported, while export earnings were much lower.

Earlier this year, the IMF approved $396 million in assistance to Nepal, a 38-month financial assistance arrangement under its Extended Credit Facility, to ease the impact of the pandemic on its economy.

Prior to that, the IMF had approved $212 million in financial assistance for Nepal in 2020 after a sharp drop in foreign exchange earnings from tourism and remittances.

Nepal’s external debt has more than doubled to $7.77 billion in 2022 from $3.8 billion in 2012, according to government estimates.

Its foreign exchange reserves have shrunk to nearly $9 billion, barely enough to cover imports for around 6 months, from nearly $12 billion a year earlier – raising concerns among some international experts that Kathmandu may need of foreign aid.

Adhikari said he was confident that the recent monetary policy tightening would prevent imports from rising further.

Nepal’s imports rose more than 24% to $15 billion in a year ending mid-July, from $12 billion the year before, while exports jumped 41% to $1.56 billion from $1.1 billion, according to the latest data from the Customs Department.

Adhikari said there were no plans to impose more restrictions on imports, referring to a recent extension of restrictions on luxury goods and non-essential items until the end of August.

“Rather than putting direct curbs on imports, our objective will be to stabilize the external sector by managing demand through tightening measures.”

He expressed hope that inflation would come down soon.

“If oil prices normalize and global supply chains affected by the Russian-Ukrainian war resume fully, we hope to achieve the 7% inflation target.”

Nepal’s retail price inflation accelerated to 8.56% for the month ending mid-June, the highest in nearly six years, prompting the central bank to raise policy rates last month . Read more

($1 = 126.4900 Nepalese rupees)

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Written by Manoj Kumar; Editing by Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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