By Shanker Man Singh The International Monetary Fund (IMF) representative who came to Nepal recently said that Nepal's economy is showing initial signs of "recovery". This will be reflected in Article IV, which will be made public after some time also . In the statement issued by the team that came to Kathmandu from September 11 to 22 after reaching Washington, it is mentioned that they discussed with the Nepali side the implementation of the program supported by the Economic Development and Extended Credit Facility (ECF). Nepal's economy is showing early signs of recovery. There are initial signs of improvement in economy. Incoming high-frequency data show that import growth is entering positive territory, tax collections are improving, and public investment is picking up. Credit growth is recovering while remaining below nominal GDP growth. Inflation eased to around 3.6 percent by mid-July, partly reflecting favorable commodity prices and weak demand. International currency reserves continued to grow on the back of strong remittances, growth in tourism, and still low imports. Meanwhile, the team also suggested that it is important to speed up the pace of reform in order to lead the economy towards sustainable, strong and inclusive growth. It is necessary to increase the implementation of public investment, further strengthen domestic revenue mobilization and prompt disbursement of subsidies. It also pointed out that as banks face high non-performing loans and capital constraints, continued vigilance is needed by strengthening regulation and completing loan portfolio reviews of the big 10 banks. Addressing the weaknesses of savings and credit cooperatives is a priority. The recent amendments to the Anti-Money Laundering Act are a welcome step. Amending the Nepal Rastra Bank Act, completing the external audit of Nepal Rastra Bank and increasing the transparency of public institutions will enhance good governance and accountability. The Investment Facilitation Act will strengthen the investment environment in Nepal. The IMF  welcomed the continued efforts of the authorities to fulfill key commitments under the fund-supported program with the help of IMF technical assistance. IMF and Nepal The International Monetary Fund has 190 member countries around the world. Nepal became a member in 1961. Nepal took a loan for the first time in 1984. In 2024, the Executive Board of the IMF completed the fourth review for Nepal under the four-year Extended Credit Facility (ECF). Funds are perceived to help protect groups and preserve macroeconomic and financial stability. The program is also helping to stimulate additional financing from Nepal's development partners. The economy continues to face challenges, with growth projected at around 3 percent in FY2023/24 below potential in terms of domestic demand and post-pandemic balance sheet repair. Economic activity is expected to achieve a growth rate of 4.9 percent in fiscal year 2024/25, supported by strong domestic demand. A cautious monetary policy stance, a planned increase in capital expenditure in the 2024/25 budget, additional hydropower generation and continued growth in tourist arrivals are expected to boost domestic demand and growth. Inflation is estimated to remain within the Nepal Rastra Bank's target of 5.5 percent. It should not be forgotten that according to the conclusions of the IMF in the past, the tight monetary policy helped bring stability to Nepal's external sector and also contributed to reducing the rate of price growth. It has also emphasized the need for economic reforms for sustainable medium-term development. In addition, apart from the regular assessment of Nepal's economy, the IMF has also reviewed the compliance with the terms of loans provided by the fund this year. It has also become public that the IMF has reviewed the first, second and final third instalments of the 52 million US dollar loan assistance received by Nepal under the "Extended Credit Facility" from the International Monetary Fund. Although the external sector of the country has returned to a satisfactory state, the public finances are in a difficult situation. Bad loans of banks and financial institutions pose a threat to financial stability and weaken banks' ability to lend banks and regulators need to take swift and decisive action to address this problem and prevent it from escalating. About that matter, IMF may have made a note and submitted a suggestion. The IMF appears committed to the policies and reforms envisioned in the “Nepal Extended Credit Facility” supported program, in particular, to formulate a comprehensive revenue mobilization strategy to increase tax collection and make room for priority spending. To strengthen management by developing systems for early identification and monitoring of financial risks, especially those arising from public enterprises; improving the efficiency and transparency of public investment spending; continue to improve banking regulation and supervision and ensure bank asset quality; and in line with the best international practices. The Nepal Rastra Bank Act has been amended to strengthen the governance of the Bank. In addition, Nepal is committed to implementing the recommendations of the ongoing AML/CFT mutual evaluation conducted by the Asia/Pacific Group. The program is expected to help Nepal's economy grow by 5 percent in the medium term and inflation at around 6 percent, maintain adequate levels of international reserves and keep public debt on a sustainable path in the medium term. It seems that the bad debt ratio has increased after the removal of facilities provided by NRB to reduce the impact of the slowdown in the country's economy, political instability and the Covid-19 pandemic. It is noteworthy here that even though liquidity is easy now, it is not an exaggeration to say that the increasing bad loans are also one of the reasons why banks are unwilling or unable to give loans. According to the findings of the IMF in the past, the tight monetary policy helped bring stability to Nepal's external sector and contributed to reducing the rate of price growth. Meanwhile, rising inflation — which hits low-income workers particularly hard — is straining monetary policy. In both global and developed economies, inflation has been running at the highest though the NRB figure is quite different. In an emerging market and developing economies, this is the highest rate since 2011. Many emerging and developing economies are withdrawing policy support to contain inflationary pressures. In the current economic environment, the IMF and development partners evaluate the "micro" economic situation of Nepal and that is the basis for other development partners. The "peg" of the currency with India is the suggestion of the IMF. Therefore, it is not so relevant to say that his suggestions are all right and wrong. But in some cases, looking at the situation of the country, the related agencies have made some adjustments in the past, and the private sector's demand advice and suggestions should be reviewed in the review of the financial and monetary policy and the IMF. It is the need of the day to understand and adjust between the two by looking at suggestions as well. In terms of the fifth review of the program, it is also mentioned that the performance under the program will be formally evaluated.