The International Monetary Fund (IMF) has agreed, in principle, to renew the Poverty Reduction and Growth Facility (PRGF) agreement with Nepal for the next year, despite the slow pace in fulfilling "prior commitments" agreed to three years ago.

A government official told a leading news website, eKantipur. com on Monday that the IMF decision came following "intense" negotiations with a six-member IMF mission led by Sanjay Kalra that was in Kathmandu last week. IMF board has to approve the decision to make it effective.

The main task of the mission was to review implementation of the PRGF agreement signed three years ago and to set criteria for next PRGF agreement expected to be renewed in November, according to the website.

"The renewal of the PRGF is a clear indication that major development partners are ready to support Nepal in the context of the changed political context, which has unveiled new opportunities for reforms," the official said on condition of anonymity.

Nepal signed the PRGF agreement with IMF in November 2003 and began borrowing under the PRGF, and also obtained Poverty Reduction Strategic Credit (PRSC) from the World Bank.

The PRGF allows credit of up to 73.9 million U.S. dollars from the IMF.

Nepal drew the first tranche of 10.6 million dollars in November 2003 and also the second tranche but has not borrowed thereafter owing to delays in fulfilling "prior commitments".

During discussions with IMF mission in Kathmandu, Finance Minister Ram Sharan Mahat made it clear that no dramatic reforms were possible given the pressing political agenda before the country.

Nepal needs to be under PRGF in order to qualify for World Bank 's budget support under PRSC II, amounting to around 75 million dollars expected for the current fiscal year.

Renewal of PRGF is particularly important to certify that financial discipline of the country is at par with international standards and also to send a positive signal to donor agencies that Nepal has prudent policies, and qualifies for more assistance and investments.

Source: Xinhua