By TON Nepal

Amid assumptions that Nepal could face an economic failure similar to Sri Lanka, the International Monetary Fund, on Thursday said that Nepal is in a robust position in handling the economy and financial risks. The International Monetary Fund's Resident Representative to Nepal, said, "Nepal is still in the position of strength in terms of managing economic risks.

On Thursday, the International Monetary Fund's Resident Representative to Nepal was speaking at a programme titled ‘Business and Investment Facilitation Workshop: Nepal’, prepared by the US Embassy in Kathmandu

During the Workshop she said that Nepal's financial development had been well on path till January but the Russia-Ukraine war generated high product charges and led to high inflation in import-dependent Nepal. Nepal's debt to GDP ratio is at 40 percent, which is comfortable.

The foreign exchange reserve is deteriorating but is still satisfactory. The government's economic policy is not expansionary as predictable. Tight financial policy has been presented and there is strong support to Nepal from development partners. That's why Nepal is in a position of strength.

Despite concerns being raised about the state of economy of Nepal amid declining foreign exchange reserves in the last fiscal, international agencies like the IMF and the World Bank have yet to show a red flag on Nepal's economy. Tightening of the monetary policy will help to maintain international reserves without the need to control import limitations that could worsen inflation and impede growth.

The measures taken by the government and central bank are indicating in recent months with improvement in FDI, trade of new commodities, tourist’s arrival and remittances flow.

Nepali economy is facing challenges especially on the exterior side and inflation. The country’s annual imports bill touched Rs1.92 trillion last fiscal year, increasing by 24.72 percent. Nepal’s inflation stretched a 70-month high in June and there are signs that it will breach the double-digit mark by the end of the fiscal year ending mid-July.

According to the Nepal Rastra Bank’s macroeconomics report, the year-on-year inflation reached 8.56 percent in the first 11 months of the last fiscal year ended in mid-June. It was 4.19 percent in the same period last fiscal year. The speaker in the programme highlighted the improved policies for foreign direct investment.

Investment safety along with return investment profit has been safeguarded. There is momentous progress in the entry and exit process, government clearances and institutional arrangement and facilitation.

Nepal received a foreign direct investment pledge for 14 projects worth Rs550 million from the US, in the last fiscal year 2021-22 creating jobs for 729 with most of the investment committee for small-scale industry, according to the Department of Industry. Such investment pledges for the US stood at Rs1.67 billion for 7 projects in the previous fiscal year 2020-21.

According to the Department of Customs, imports from the US augmented by 156.41 percent in the last fiscal year 2021-22 equated to the previous fiscal year 2020-21 as Nepal imported goods worth Rs50 billion in the last fiscal year. Nepal’s trade shortfall with the US was worth Rs32 billion in the last fiscal year 2021-22.

With USAID, Millennium Challenge Corporation (MCC), US Development Finance Corporation and others, the US government’s financial support to Nepal will be in access of $1 in future. As Nepal desires to get more American companies, investors, products and services available in Nepal. Enticing quality foreign investment, products and services need a helpful and steady business and investment climate.

The MCC project will also present business chances for foreign companies in Nepal and optimistically will enable more partnerships between Nepali and international forums in future.