With Global Help, Nepal Focuses on Recovery

$50 million loan to help Nepal overcome devastation of April earthquake

Country faces large reconstruction challenge

IMF ready to continue providing policy advice, technical assistance, financial support

The money, which was disbursed from the IMF’s Rapid Credit Facility, will be sent directly to the Ministry of Finance’s account at the country’s central bank, and will be lent at the Fund’s concessional interest rate (currently zero percent), with a grace period of five years.

Nepal is still struggling to overcome the effects of the country’s worst earthquake in more than 80 years. The 7.8 magnitude quake which struck the historic district of Gorkha in Nepal, about 47 miles northwest of Kathmandu, was followed by almost 300 more aftershocks. Almost 9,000 people were killed, 2,300 more were injured, and hundreds of thousands have been left homeless.

An estimated 8 million people have been affected by the disaster. Many cultural and architectural heritage sites were heavily damaged. Poorer, rural areas have been more adversely affected than towns and cities due to the inferior quality of the houses.

Policies to support the recovery

Strengthening public financial management will be key to the swift and effective implementation of reconstruction efforts. The authorities are simplifying administrative procedures for capital spending, and have established a National Reconstruction Authority (NRA) to speed up reconstruction in the country’s districts that were the most affected by the earthquakes.

Strong coordination between the NRA and the annual budget process is needed to promote effective use of the earthquake relief funds. Enhanced donor coordination, additional capacity building support, and the IMF’s continued provision of technical assistance in public financial management will help to underpin the authorities’ reconstruction efforts.

The damage and economic disruption caused by the earthquake could affect the loan portfolio of banks, microfinance institutions and cooperatives, particularly in rural areas where borrowers lost lives and livelihoods.

To bolster the resilience of the...