2019年-IMF国际货币组织全球_Nepal_Selected_Issues_29页_1mb

Summary of IMF Country Report No. 19/61 on Nepal

Core Content

This IMF report presents a detailed analysis of key economic issues in Nepal, focusing on inflation co-movement with India, fiscal federalism, and financial inclusion. It serves as background material for the 2018 Article IV consultation and outlines policy implications for sustainable economic growth and stability.

Main Issues and Key Findings

1. Inflation Co-Movement Between India and Nepal

• Stylized Facts:

  • Headline inflation rates between India and Nepal are highly correlated, but this is primarily due to food inflation, not core inflation.
  • Countries with strong trade ties to India show stronger food inflation co-movement, but not core inflation.
  • Table 1 highlights that food inflation correlation is higher for Bhutan and Nepal compared to other countries.

• Empirical Analysis:

  • A quasi-correlation measure is used to assess inflation co-movement.
  • Rainfall deviations from seasonal norms are a significant determinant of food inflation co-movement.
  • Exchange rate and import share from India also influence food inflation co-movement.
  • Core inflation is mainly determined by domestic factors, with limited influence from India.

• Policy Implications:

  • Nepal should rely on domestic monetary policy to manage inflation, as food inflation co-movement is not solely due to India.
  • The report emphasizes the need for nuance in the perception of inflation co-movement, as core inflation is weak and not influenced by India.
  • Domestic policy is more effective in controlling core inflation, and thus monetary policy should be calibrated to domestic conditions.

2. Managing Effective Fiscal Federalism

• Fiscal Federalism Transition:

  • Nepal is transitioning from a unitarian state to a federal democratic republic as per the 2015 Constitution.
  • The new structure includes federal, provincial, and local governments.

• Fiscal and Institutional Arrangements:

  • Equalization grants, conditional grants, complementary grants, and special grants are the main forms of fiscal transfers.
  • Revenue-sharing is set at 70:15:15 for VAT and excise taxes, and 50:25:25 for royalties.
  • Local governments collect taxes such as property tax, rent, and vehicle registration fees.

• Challenges:

  • Vertical fiscal imbalance (VFI) is significant, with subnational governments having limited own-source revenue.
  • Fiscal decentralization may lead to pro-cyclical fiscal policy, reducing the central government’s ability to implement counter-cyclical measures.
  • Implementation capacity at subnational levels is weak, leading to underutilization of resources and increased public deposits.

• Policy Implications:

  • Short-term priorities:
    • Strengthen policy implementation capacity through training, standardization, and technology.
    • Establish public financial management systems at subnational levels.
    • Create local consolidated funds to serve as stabilization funds.
  • Medium-term priorities:
    • Adjust expenditure allocations to align with responsibilities and needs.
    • Adopt the Fiscal Responsibility and Budget Management Bill (FRBMB) to ensure fiscal discipline.
    • Reinstated realistic medium-term expenditure framework and budget planning.
    • Conduct periodic spending reviews to refine revenue sharing and fiscal transfers.
    • Clarify functional and revenue responsibilities at all levels to avoid duplication and waste.
    • Review costs of service delivery in the federal structure to ensure budget envelopes match expected costs.

3. Sustainable Finance and Financial Inclusion

• Financial Sector Development:

  • Nepal's financial sector needs to be sustained to support long-term growth.
  • The sector remains vulnerable to credit expansion and external shocks.

• Financial Inclusion:

  • Financial inclusion has improved gradually, but gaps persist between urban and rural areas and across genders.
  • The financial inclusion plan should focus on underserved populations and progressively close gaps.

Key Information

• Document Date: February 2019
• Report Prepared By: Patrick Blagrave and Piyaporn Sodsriwiboon (both from APD)
• Main Themes:
  • Inflation co-movement is mainly driven by food prices, not core inflation.
  • Fiscal federalism is being implemented rapidly, but it poses challenges in fiscal sustainability and allocative efficiency.
  • Financial inclusion is improving, but inequities remain.
• Policy Focus:
  • Strengthen monetary policy to control domestic inflation.
  • Improve public financial management and implementation capacity.
  • Ensure fiscal discipline and align responsibilities across government levels.
  • Enhance financial inclusion through targeted initiatives.

References

• Auer, R., and A. Mehrotra, 2014, "Trade Linkages and the Globalisation of Inflation in Asia and the Pacific," Journal of International Money and Finance.
• Blagrave, P., 2018, "Inflation Co-Movement in Asia: Blame it on the Rain?" IMF Working Paper, forthcoming.
• Duval, R., N. Li, R. Saraf, and D. Seneviratne, 2016, "Value-Added Trade and Business Cycle Synchronization," Journal of International Economics.

Conclusion

The report highlights that Nepal's fiscal federalism transition is rapid but complex, with challenges in implementation and fiscal sustainability. It also underscores the limited role of India in driving non-food inflation and the importance of domestic monetary policy. Financial inclusion is progressing, but gaps remain, particularly in rural and gender-based access. Overall, the report emphasizes the need for careful policy design, institutional strengthening, and capacity building to ensure long-term economic stability and inclusive growth.