Kathmandu, April 16

Not very confident with the fund mobilising mechanism of the government, donors themselves spent 37 per cent of the annual foreign aid that Nepal received in 2015-16 off the government channel.

Out of the $1.074 billion foreign aid that Nepal received in fiscal year 2015-16, $395.41 million of foreign assistance was disbursed through off-budget projects, according to the Development Cooperation Report of 2015-16 unveiled by the Ministry of Finance (MoF) today.

The on-budget and off-budget expenditure of foreign aid in 2014-15 was 65 per cent and 35 per cent, respectively.

“The country witnessed a slight decline in on-budget expenditure of foreign aid in 2015-16 as some of the reconstruction activities in the country are being implemented directly by development partners,” the report stated.

However, the total foreign assistance in the country in 2015-16 increased by 5.22 per cent compared to foreign assistance in fiscal 2014-15. While the total disbursement of foreign aid was $1.020 billion in 2014-15, it increased to $1.074 billion in 2015-16.

As per the Development Cooperation Report, 74 per cent ($498.94 million) of the 63 per cent ($678.65 million) of foreign aid in 2015-16 was channelled through the national treasury using national public financial management

systems. Similarly, the remaining 26 per cent ($179.72 million) of the foreign aid disbursement was through off treasury mechanism.

The report also shows that multilateral development partners have been providing more foreign aid to Nepal as compared to bilateral development partners. Of the total foreign aid disbursement in 2015-16, multilateral development partners contributed $625.18 million (58 per cent) and bilateral development partners contributed $448.87 million (42 per cent). Among multilateral development partners, World Bank provided the highest amount of foreign aid to Nepal disbursing $243.69 million. Similarly, USAID disbursed the highest amount among bilateral development partners with $118.93 million being provided as foreign aid.

The report has stated that Official Development Assistance (ODA) in Nepal is still scattered and fragmented. Though the number of foreign aided projects came down to 369 in 2015-16 from 442 in the previous year, the total foreign aid in 2015-16 was disbursed across 212 grant projects, 145 technical assistance projects and 49 loan projects.

Meanwhile, the energy sector received the highest amount of foreign aid in 2015-16 surpassing the health sector, which had received the highest foreign aid in the previous year. The energy sector received $150.04 million (14.02 per cent) followed by $119.15 million (11.09 per cent) for local development, $111.55 million (10.39 per cent) for education and $103.44 million (9.63 per cent) in health sector.

Unveiling the report, Finance Minister Krishna Bahadur Mahara said that though foreign donors often focus on running different projects according to their desire and spend accordingly, the government is encouraging all development partners to run projects based on the policy of the government and interest and demand of the country.

Similarly, Shanta Raj Subedi, secretary of the Ministry of Finance, said that the government will not entertain foreign aid in small and scattered projects. “We will encourage foreign aid in projects of basic priorities of the country and output based projects,” he said.