IMF says Nepal's outlook subject to 'considerable downside risk'

"The outlook is subject to considerable downside risk. The recent promulgation of the constitution led to protests in Nepal's southern lowlands and disruptions to trade routes to and from the southern border, causing fuel shortages and dampening economic activity," reads the update of IMF. It also said that the real GDP growth decelerated to 3.4 percent in the last fiscal year 2014/15 as a result also of the earthquakes in April and May. Such growth was 5.5 percent in the previous fiscal year 'thanks to a favorable monsoon'. It, however, said that Nepal's medium-term outlook depends importantly on the authorities' reform efforts. IMF also said that the government should step up efforts to implement reconstruction spending. "Experience in other fragile countries shows that natural disasters can have permanent adverse effects on potential growth, thus highlighting the need for ambitious macroeconomic and structural policies," reads the update. "Fiscal policy should accommodate stepped-up efforts to implement post-earthquake reconstruction spending. Monetary policy should focus on supporting the exchange rate peg and containing inflation. Ongoing efforts to mitigate financial sector risks-amplified by the earthquakes-should be intensified," it added. IMF has also reiterated its position that the peg of Nepali rupee to the Indian rupee remains a key source of stability. "Monetary policy should focus on supporting the exchange rate peg and containing inflation. Ongoing efforts to mitigate financial sector risks -- amplified by the earthquakes -- should be intensified," it added. IMF, however, has projected robust growth in the South Asia region despite global uncertainty.