Abstract
2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nepal
Fund Relations
(As of November 30, 2018)
Membership Status: Joined September 6, 1961; accepted Article VIII, Sections 2, 3, and 4 on May 30, 1994.
General Resources Account:
| SDR Million | Percent Quota | |
|---|---|---|
| Quota | 156.90 | 100.00 |
| Fund holdings of currency | 140.92 | 89.82 |
| Reserve position in Fund | 15.98 | 10.19 |
| SDR Million | Percent Quota | |
|---|---|---|
| Quota | 156.90 | 100.00 |
| Fund holdings of currency | 140.92 | 89.82 |
| Reserve position in Fund | 15.98 | 10.19 |
SDR Department:
| SDR Million | Percent Allocation | |
|---|---|---|
| Net cumulative allocation | 68.10 | 100.00 |
| Holdings | 4.81 | 7.06 |
| SDR Million | Percent Allocation | |
|---|---|---|
| Net cumulative allocation | 68.10 | 100.00 |
| Holdings | 4.81 | 7.06 |
Outstanding Purchases and Loans:
| SDR Million | Percent Quota | |
|---|---|---|
| RCF Loans | 47.06 | 29.99 |
| SDR Million | Percent Quota | |
|---|---|---|
| RCF Loans | 47.06 | 29.99 |
Financial Arrangements: (In SDR Million)
| Type | Approval Date | Expiration Date | Amount Approved | Amount Drawn |
|---|---|---|---|---|
| ECF | 11/19/03 | 11/18/07 | 49.90 | 49.90 |
| ECF | 10/05/92 | 10/04/95 | 33.57 | 16.79 |
| SAF | 10/14/87 | 10/13/90 | 26.11 | 26.11 |
| Type | Approval Date | Expiration Date | Amount Approved | Amount Drawn |
|---|---|---|---|---|
| ECF | 11/19/03 | 11/18/07 | 49.90 | 49.90 |
| ECF | 10/05/92 | 10/04/95 | 33.57 | 16.79 |
| SAF | 10/14/87 | 10/13/90 | 26.11 | 26.11 |
Projected Obligations to Fund:
(in millions of SDRs; based on existing use of resources and present holdings of SDRs):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Principal | 2.85 | 5.70 | 2.85 | 7.13 | 7.13 |
| Charges/interest | 0.68 | 0.69 | 0.68 | 0.68 | |
| Total | 2.85 | 6.39 | 3.54 | 7.81 | 7.81 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Principal | 2.85 | 5.70 | 2.85 | 7.13 | 7.13 |
| Charges/interest | 0.68 | 0.69 | 0.68 | 0.68 | |
| Total | 2.85 | 6.39 | 3.54 | 7.81 | 7.81 |
Exchange Rate Arrangement
The exchange rate arrangement of Nepal is a conventional peg to a single currency unit. The Nepalese rupee is pegged to the Indian rupee at a rate of NRs 1.6 per Indian rupee. Currently, all merchandise imports (except for a few goods restricted for security or related reasons) are freely available through an open general license system, with foreign exchange provided through the banking system at the market exchange rate.
As of December 21, 2018, the exchange rate of the Nepalese rupee (Nr) was US$1=Nrs. 111.53. The restriction on quantitative limits on foreign exchange for leisure travel was removed in early 2011. The Industrial Enterprises Act places a 75 percent limit on the conversion and transfer to foreign currency of salaries of non-residents from countries where convertible currency is in circulation. Since the limit applies to amounts that may be less than net salaries, it gives rise to an exchange restriction under Article VIII.
Safeguards Assessments
An update safeguards assessment of the Nepal Rastra Bank (NRB) was completed in February 2016 with respect to the Rapid Credit Facility approved on July 31, 2015. The assessment found that the NRB had made limited progress in improving its safeguards framework and addressing recommendations from the previous assessment (2011). In particular, the quality of the external audit continued to fall short of international standards and priority should be given to engaging an auditor with requisite experience. The legal framework should also be enhanced to strengthen the central bank’s autonomy and governance arrangements. The assessment concluded that strong commitment from the NRB Board and management is essential to improve the internal audit function and reinforce controls in key areas, including foreign reserves management and currency operations.
A safeguards monitoring mission to the NRB was undertaken in May 2018 to follow up on the status of safeguards recommendations from the 2016 assessment. The mission found limited progress on implementation of recommendations, and the NRB’s autonomy was further weakened by subsequent amendments to the NRB Act. Concerted effort by the NRB are needed to achieve meaningful progress on safeguards recommendations.
2017 Article IV Consultation
The 2017 Article IV Consultation Staff Report (IMF Country Report No. 17/74) was prepared by IMF staff for the Executive Board’s consideration on a lapse-of-time basis and was published in March 2017. Consultations with Nepal are held on the standard 12-month Article IV consultation cycle.
Technical Assistance (since 2017 Article IV Consultation)
| Purpose | Year | ||
|---|---|---|---|
| MCM | Strengthening Internal Audit | 2018 | |
| Cyber Security | 2018 | ||
| SARTTAC | Financial Soundness Indicators | 2017 | |
| Liquidity Forecasting and Management | 2017 | ||
| Financial Supervision and Regulation | 2017 | ||
| Strengthening Fiscal Reporting | 2018 | ||
| Budget Formulation and Good Practices | 2018 | ||
| Government Finance Statistics and Public | Sector Debt Statistics Training | 2018 | |
| Price Statistics Training | 2018 |
| Purpose | Year | ||
|---|---|---|---|
| MCM | Strengthening Internal Audit | 2018 | |
| Cyber Security | 2018 | ||
| SARTTAC | Financial Soundness Indicators | 2017 | |
| Liquidity Forecasting and Management | 2017 | ||
| Financial Supervision and Regulation | 2017 | ||
| Strengthening Fiscal Reporting | 2018 | ||
| Budget Formulation and Good Practices | 2018 | ||
| Government Finance Statistics and Public | Sector Debt Statistics Training | 2018 | |
| Price Statistics Training | 2018 |
Resident Representative
Mr. Andreas Bauer has been the Senior Resident Representative since June 15, 2016. He is based in New Delhi.
Information on the Activities of Other IFIS
Information on the activities of other IFIs in Nepal can be found at:
World Bank: http://www.worldbank.org/en/country/nepal/overview
Asian Development Bank: https://www.adb.org/sites/default/files/publication/27783/nep-2017.pdf
Statistical Issues
As of January 9, 2019
| I. Assessment of Data Adequacy for Surveillance | |
| General: Economic and financial data are broadly adequate for surveillance, with scope for improvement especially in updating the base year of the national account, more detailed price statistics, and the timeliness and quality of balance of payments data. | |
| National Accounts: The Central Bureau of Statistics (CBS) compiles national accounts using the 1993 SNA standard. Key estimates include annual GDP by industry and by expenditure categories (in current and constant prices), and gross national income and savings. Some expenditure categories continue to be affected by limited source data, particularly for household final consumption. The CBS has plans to release a major revision of the national accounts, which incorporates improved source data and updated methodologies, and will update the base year for the constant price measures from 2000/01 to 2010/11, during 2019. The compilation of the new benchmark year for the national accounts and its rebasing is being supported by the World Bank. Quarterly GDP estimates are compiled but not disseminated. | |
| Price Statistics: The Nepal Rastra Bank (NRB) compiles the consumer price index (CPI). A new CPI series with 2014/15 as base year (from previous base year of 2005/06) has been released in October 2015 based on a new household expenditure survey. Initial plans had been made to transfer the responsibility of compiling the CPI from the NRB to the Central Bureau of Statistics (CBS). A core inflation series is not published, although underlying data necessary to calculate such a series appear to be available. NRB also publishes a wholesale price index (WPI), with weights based on 1999/2000 data. Broadly, the index covers agricultural commodities (49.6 percent), domestic manufactured goods (20.4 percent), and imported goods (30 percent). The CBS has received TA to update and expand the producer price index (PPI) to include other economic sectors. Current PPI coverage is restricted to manufacturing. As well, an index of wages and salaries is compiled and published, with base year 2004/05. | |
| Government Finance Statistics: The authorities began to compile fiscal data in accordance with IMF’s Government Finance Statistics Manual 2001 (GFSM 2001) in 2011. The budget classification in the GFSY return needs further improvement in a number of areas; for example, to exclude financing transactions from the functional classification of expenditure; make a clearer distinction between revenue and transactions in nonfinancial assets (and also ensuring the type of non-financial assets are correctly recorded); clarify whether transactions are correctly classified as financial assets or subsidies and capital payments to enterprises; and other improvements to ensure full consistency with the GFSM 2001. Meanwhile, the treasury single account system (TSA) has been rolled out to all 75 districts including Kathmandu, which allows for more timely and accurate fiscal data reporting and monitoring. However, a number of fees collected outside the budget, foreign aid directly paid by donors, the operations of extra-budgetary entities and local governments are not reported in the annual budget, and there is no compilation of the government’s balance sheet in accordance with the GFSM 2001. It is expected that after the 2018 Article IV mission, some data on assets and liabilities will be become available and that the authorities will re-start their submission to the WB/IMF Public Sector Debt Database. Government finance statistics are regularly reported for publication in the Government Finance Statistics Yearbook, but not in the IFS. | |
| Monetary and Financial Statistics: The Nepal Rastra Bank (NRB) reports the Standardized Report Forms (SRFs) 1SR for central bank, 2SR for other depository corporations (ODCs), and 5SR for monetary aggregates for publication in the IMF’s International Financial Statistics on a monthly basis with a lag of about one month. The coverage of monthly monetary statistics has been expanded to include development banks and finance companies, and the NRB now compiles and publishes an expanded broad money survey, which is a significant step forward. However, there are some inconsistencies in the reporting of positions between the NRB and the ODCs. Minimizing these will further improve data quality. Financial Soundness Indicators: the NRB reports the 12 core financial soundness indicators (FSIs) and 8 of the 13 encouraged FSIs for deposit takers, 2 FSIs for the other financial corporations (OFCs), one FSI for households, and 2 FSIs for real estate markets—on a quarterly basis—for posting on the IMF’s FSI website. FSIs are reported with a lag of about 4 months. | |
| External Sector Statistics: The NRB compiles and disseminates balance of payments (BOP) statistics in conformity with the fifth edition of the Balance of Payments Statistics Manual (BPM5). BOP statistics present several shortcomings in terms of coverage, classification, and data sources. Key shortcomings in BOP statistics are: (i) underestimation of imports, and to a lesser extent exports; (ii) significant problems in measurement of remittances; (iii) incompleteness of data on foreign grants, making it difficult to classify current vs. capital, and official vs. private grants; (iv) absence of direct investment data; and (v) unrecorded financial flows. In February 2015, the NRB started reporting international investment position (IIP) data following the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). Since 2012, NRB has been receiving technical assistance (TA) in the external sector statistics (ESS) that include the areas of BOP, IIP and external debt statistics (EDS). During the 2016 STA mission has continued redesigning the International Reporting System (ITRS), the main collection source for compiling BOP and IIP, assisted the authorities in improving the surveys for collecting direct investment and trade credit data, and provided hands-on training on how to operate working files for the compilation of BOP in BPM6 format. Overall the quality of BOP data has improved with the support of IMF STA TA and training of the NRB staff through ESS IMF HQ and regional courses. | |
| II. Data Standards and Quality | |
| Nepal has implemented the recommendations of enhanced General Data Dissemination System (e-GDDS). Its National Summary Data Page was launched in June 2017 and is available at https://www.nrb.org.np/red/nsdp/. | Data ROSC on fiscal transparency was published in October 2007. |
| I. Assessment of Data Adequacy for Surveillance | |
| General: Economic and financial data are broadly adequate for surveillance, with scope for improvement especially in updating the base year of the national account, more detailed price statistics, and the timeliness and quality of balance of payments data. | |
| National Accounts: The Central Bureau of Statistics (CBS) compiles national accounts using the 1993 SNA standard. Key estimates include annual GDP by industry and by expenditure categories (in current and constant prices), and gross national income and savings. Some expenditure categories continue to be affected by limited source data, particularly for household final consumption. The CBS has plans to release a major revision of the national accounts, which incorporates improved source data and updated methodologies, and will update the base year for the constant price measures from 2000/01 to 2010/11, during 2019. The compilation of the new benchmark year for the national accounts and its rebasing is being supported by the World Bank. Quarterly GDP estimates are compiled but not disseminated. | |
| Price Statistics: The Nepal Rastra Bank (NRB) compiles the consumer price index (CPI). A new CPI series with 2014/15 as base year (from previous base year of 2005/06) has been released in October 2015 based on a new household expenditure survey. Initial plans had been made to transfer the responsibility of compiling the CPI from the NRB to the Central Bureau of Statistics (CBS). A core inflation series is not published, although underlying data necessary to calculate such a series appear to be available. NRB also publishes a wholesale price index (WPI), with weights based on 1999/2000 data. Broadly, the index covers agricultural commodities (49.6 percent), domestic manufactured goods (20.4 percent), and imported goods (30 percent). The CBS has received TA to update and expand the producer price index (PPI) to include other economic sectors. Current PPI coverage is restricted to manufacturing. As well, an index of wages and salaries is compiled and published, with base year 2004/05. | |
| Government Finance Statistics: The authorities began to compile fiscal data in accordance with IMF’s Government Finance Statistics Manual 2001 (GFSM 2001) in 2011. The budget classification in the GFSY return needs further improvement in a number of areas; for example, to exclude financing transactions from the functional classification of expenditure; make a clearer distinction between revenue and transactions in nonfinancial assets (and also ensuring the type of non-financial assets are correctly recorded); clarify whether transactions are correctly classified as financial assets or subsidies and capital payments to enterprises; and other improvements to ensure full consistency with the GFSM 2001. Meanwhile, the treasury single account system (TSA) has been rolled out to all 75 districts including Kathmandu, which allows for more timely and accurate fiscal data reporting and monitoring. However, a number of fees collected outside the budget, foreign aid directly paid by donors, the operations of extra-budgetary entities and local governments are not reported in the annual budget, and there is no compilation of the government’s balance sheet in accordance with the GFSM 2001. It is expected that after the 2018 Article IV mission, some data on assets and liabilities will be become available and that the authorities will re-start their submission to the WB/IMF Public Sector Debt Database. Government finance statistics are regularly reported for publication in the Government Finance Statistics Yearbook, but not in the IFS. | |
| Monetary and Financial Statistics: The Nepal Rastra Bank (NRB) reports the Standardized Report Forms (SRFs) 1SR for central bank, 2SR for other depository corporations (ODCs), and 5SR for monetary aggregates for publication in the IMF’s International Financial Statistics on a monthly basis with a lag of about one month. The coverage of monthly monetary statistics has been expanded to include development banks and finance companies, and the NRB now compiles and publishes an expanded broad money survey, which is a significant step forward. However, there are some inconsistencies in the reporting of positions between the NRB and the ODCs. Minimizing these will further improve data quality. Financial Soundness Indicators: the NRB reports the 12 core financial soundness indicators (FSIs) and 8 of the 13 encouraged FSIs for deposit takers, 2 FSIs for the other financial corporations (OFCs), one FSI for households, and 2 FSIs for real estate markets—on a quarterly basis—for posting on the IMF’s FSI website. FSIs are reported with a lag of about 4 months. | |
| External Sector Statistics: The NRB compiles and disseminates balance of payments (BOP) statistics in conformity with the fifth edition of the Balance of Payments Statistics Manual (BPM5). BOP statistics present several shortcomings in terms of coverage, classification, and data sources. Key shortcomings in BOP statistics are: (i) underestimation of imports, and to a lesser extent exports; (ii) significant problems in measurement of remittances; (iii) incompleteness of data on foreign grants, making it difficult to classify current vs. capital, and official vs. private grants; (iv) absence of direct investment data; and (v) unrecorded financial flows. In February 2015, the NRB started reporting international investment position (IIP) data following the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). Since 2012, NRB has been receiving technical assistance (TA) in the external sector statistics (ESS) that include the areas of BOP, IIP and external debt statistics (EDS). During the 2016 STA mission has continued redesigning the International Reporting System (ITRS), the main collection source for compiling BOP and IIP, assisted the authorities in improving the surveys for collecting direct investment and trade credit data, and provided hands-on training on how to operate working files for the compilation of BOP in BPM6 format. Overall the quality of BOP data has improved with the support of IMF STA TA and training of the NRB staff through ESS IMF HQ and regional courses. | |
| II. Data Standards and Quality | |
| Nepal has implemented the recommendations of enhanced General Data Dissemination System (e-GDDS). Its National Summary Data Page was launched in June 2017 and is available at https://www.nrb.org.np/red/nsdp/. | Data ROSC on fiscal transparency was published in October 2007. |
Nepal—Table of Common Indicators Required for Surveillance
(As of December 31, 2018)
Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Nepal—Table of Common Indicators Required for Surveillance
(As of December 31, 2018)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | |
|---|---|---|---|---|---|
| Exchange Rates | 12/18 | 12/18 | D and M | W and M | W and M |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | 11/18 | 12/18 | M | M | M |
| Reserve/Base Money | 11/18 | 12/18 | M | M | M |
| Broad Money | 11/18 | 12/18 | M | M | M |
| Central Bank Balance Sheet | 11/18 | 12/18 | M | M | M |
| Consolidated Balance Sheet of the Banking System | 11/18 | 12/18 | M | M | M |
| Interest Rates2 | 11/18 | 12/18 | D and M | W and M | W and M |
| Consumer Price Index | 10/18 | 11/18 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | 10/18 | 11/18 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3– Central Government | 10/18 | 11/18 | M | M | M |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 07/18 | 11/18 | M/A | M/A | M/A |
| External Current Account Balance | 10/18 | 11/18 | M | M | M |
| Exports and Imports of Goods and Services | 10/18 | 11/18 | M | M | M |
| GDP/GNP | 2017/18 | 08/18 | A | A | A |
| Gross External Debt | 2017/18 | 08/18 | A | A | A |
| International Investment Position6 | Q2/18 | 08/18 | Q | Q | Q |
Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).
Nepal—Table of Common Indicators Required for Surveillance
(As of December 31, 2018)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | |
|---|---|---|---|---|---|
| Exchange Rates | 12/18 | 12/18 | D and M | W and M | W and M |
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | 11/18 | 12/18 | M | M | M |
| Reserve/Base Money | 11/18 | 12/18 | M | M | M |
| Broad Money | 11/18 | 12/18 | M | M | M |
| Central Bank Balance Sheet | 11/18 | 12/18 | M | M | M |
| Consolidated Balance Sheet of the Banking System | 11/18 | 12/18 | M | M | M |
| Interest Rates2 | 11/18 | 12/18 | D and M | W and M | W and M |
| Consumer Price Index | 10/18 | 11/18 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | 10/18 | 11/18 | M | M | M |
| Revenue, Expenditure, Balance and Composition of Financing3– Central Government | 10/18 | 11/18 | M | M | M |
| Stocks of Central Government and Central Government-Guaranteed Debt5 | 07/18 | 11/18 | M/A | M/A | M/A |
| External Current Account Balance | 10/18 | 11/18 | M | M | M |
| Exports and Imports of Goods and Services | 10/18 | 11/18 | M | M | M |
| GDP/GNP | 2017/18 | 08/18 | A | A | A |
| Gross External Debt | 2017/18 | 08/18 | A | A | A |
| International Investment Position6 | Q2/18 | 08/18 | Q | Q | Q |
Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).