Nepal has urged the World Bank (WB) to provide loan assistance under its Development Policy Credit-2 within this fiscal year. The request was made during an interaction between Finance Ministry officials and a visiting World Bank mission in the Capital on Monday.

Officials said the government wanted $70 million in loan assistance under DPC-2 to be reflected in the next fiscal year’s budget. Loan assistance under DPC is considered as budgetary support. A donor’s budgetary support is spent by the government in needy areas.

The government and the WB have been working on budgetary support for Nepal worth US$ 100 million for the last three years. Last year, the WB provided US$ 30 million in credit to Nepal under Development Policy Credit (DPC-1) to help it accelerate its financial sector reform programme to reduce the banking sector’s vulnerability and increase its transparency. The $30 million that came under DPC-2 was incorporated in the current fiscal year’s budget. The $70 million is the second tranche of budgetary support, an official said. 

During the meeting with the WB mission headed by Gabi G Afram, ministry officials stressed an early agreement for DPC-2. Madhu Marasini, chief of the international economic cooperation coordination division, the WB team has said negotiations for DPC-2 can be done in Oct-Nov, but the ministry wants it advanced so that it can be reflected in the new budget. 

With a new government in place, the ministry’s plan is to include the assistance under DPC-2 in the new budget so that the government has resources for development. “They are positive about giving the second tranche,” said Marasini. “And we have requested them if the talks can be done a little earlier.”

DPC comes as financial sector stability credit for reforming the financial sector. The loan assistance was taken to support the Medium Term Financial Sector Reforms Programme under which tasks such as preparation of a long-term financial sector reform strategy, increasing people’s access to financial services and recapitalisation of Nepal Rastra Bank and Rastriya Banijya Bank are being carried out, the ministry said.

The visiting WB team is currently in Nepal to take stock of the promises the government had made while taking DPC-1. Rajan Khanal, chief of the Revenue Department at the ministry, the government needs to fulfil the commitments before the next budget. 

Finance Ministry officials said the government was on track to fulfil the pledges. “The amended NRB Act and the Banks and Financial Institutions Act are currently in Parliament,” said Khanal. “And a draft of the Deposit Insurance Act is currently at the ministry.”  

The capitalization of Nepal Bank Limited and Rastriya Banijya Bank is also moving forward. “Nepal Bank has been selling its assets while Rastriya Banijya Bank is floating shares to increase its capital base.”