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.