KATHMANDU, Dec 4: The International Monetary Fund (IMF) has concluded that lack of political consensus in Nepal has complicated its macroeconomic management.
In a brief report on Nepal issued yesterday, the IMF stated that dissolution of the constituent assembly has delayed significantly the passage of a full-year government budget for 2012/13 and other key pieces of legislation.
Higher growth and progress in poverty reduction could be enabled by political consensus, policy stability, an easier labor environment, and more effective use of external support, according to the IMF.
The IMF has also stated that Nepal´s macroeconomic performance improved in 2011/12 despite lingering financial sector vulnerabilities and an uncertain political environment.
"Real GDP growth accelerated to 4.6 per cent, reflecting a strong agricultural harvest, and a vibrant services sector—driven partly by a resurgence of inward remittances," according to the IMF report.
The IMF, however, said that stress on the financial sector receded with strong remittances, but serious balance sheet and other risks remain.
"Financial soundness indicators show some improvement, but concerns remain about the reliability of reported data. Profitability remains low and extension of new private sector credit was tepid," the IMF report further states.
According to the IMF, the outlook for 2012/13 is challenging and real GDP growth is projected to decline to 3.8 per cent, reflecting a weaker monsoon, and slower services activity as remittance growth may slow.