IMF sends economic development funds to help Nepal rebuild

3 Aug 15

The International Monetary Fund has approved a $49.7m economic development loan for Nepal to help it recover and rebuild from the two devastating earthquakes that hit the country earlier this year.

Public financial management reform would be key to the successful utilisation of the funding and the reconstruction of the Himalayan nation, the IMF added.

The total cost of the earthquakes, which struck in April and May, is estimated at about $7bn – almost a third of the country’s gross domestic product.

The loan has been financed by the IMF’s Rapid Credit Facility, set up to provide quick financial help to poor countries recovering from economic shocks, natural disasters or humanitarian crises.

The approval of the loan enables immediate disbursement of the full amount, which is equivalent to 50% of Nepal’s IMF quota in the IMF. The money, however, will be disbursed as direct budget support to the Ministry of Finance’s account at the central bank of Nepal as requested by the government, the IMF said.

Nepal’s fiscal position “both [in] the short and medium terms” is not good, the IMF said, noting that the country continued to experience slow growth, rising inflationary pressure, and increased debt levels.

Mitsuhiro Furusawa, IMF deputy managing director and acting chair, said: “Strengthening public financial management will be key to the swift and effective implementation of reconstruction efforts, and enhancement of the quality of public investment.

“Moreover, strong coordination between [Nepal’s] National Reconstruction Authority (NRA) and the annual budget process will help to promote effective use of earthquake relief funds.”

He also said structural reforms would be key to helping Nepal overcome ongoing challenges and lessen the risks highlighted by the earthquakes.

“The development of contingency plans would complement this,” Furusawa said.

Around $47bn was pledged from multilateral and bilateral donors at the International Conference on Nepal’s Reconstruction in June. Pledges included both grants and loans, which will be disbursed over the next five years to help rebuild the country. 

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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