The International Monetary Fund said on Monday that Nepal’s economy is showing early signs of recovery, suggesting that addressing vulnerabilities among savings and credit cooperatives should remain the country’s priority.

“Incoming high-frequency data shows import growth is entering into positive territory, tax collections are improving, and public investment is picking up,” said a statement issued by the IMF staff team, led by Sarwat Jahan, who concluded the Kathmandu visit, on Sunday.

The 12-day staff visit, which began on September 11, discussed recent macroeconomic developments and the implementation of the IMF’s Extended Credit Facility (ECF)-supported programme.

The IMF’s statement reads, “Credit growth is recovering while remaining appropriately below nominal GDP growth. Inflation continued to decelerate to around 3.6 percent by mid-July, partially reflecting favourable commodity prices and weak demand. International reserves continued to rise, underpinned by robust remittances, recovering tourism, and still subdued imports.”

It said that accelerating the reform momentum is critical to put the economy on a path towards sustainable, strong, and inclusive economic growth.

“This will require enhancing public investment execution, further strengthening domestic revenue mobilisation, and prompt disbursement of Child Grants.”

The IMF said that as banks deal with elevated non-performing loans and capital constraints, continued vigilance is necessary, including strengthening regulation and completing the loan portfolio review of the largest ten banks.

It said addressing vulnerabilities among savings and credit cooperatives remains a priority. “The recent amendments to the Anti-Money Laundering Act are a welcome step. Amending the Nepal Rastra Bank Act, completing NRB’s external audit, and increasing public enterprise transparency will enhance governance and accountability. The Investment Facilitation Act will bolster Nepal’s investment climate.”

The authorities’ ongoing efforts in meeting key commitments under the Fund-supported programme, with the support of IMF’s technical assistance, are welcome, it said.