ADB willing to expand annual lending to Nepal

Kathmandu, February 25

Asian Development Bank (ADB) President Takehiko Nakao has said ADB is willing to expand annual lending to Nepal by 70 per cent to $500 million per year from the current $300 million to support critical investments and reforms.

Nakao said so while meeting Prime Minister KP Sharma Oli and Finance Minister Bishnu Prasad Paudel today to discuss Nepal’s economic recovery and social development after the devastating earthquakes of last year, as per a media release.

Under ADB’s country partnership strategy with Nepal for 2013 to 2017, ADB is prioritising major investments in hydropower generation and transmission, enhancing the capacity of international airports, building new economic corridors to promote regional trade, and reforming higher education systems.

ADB will continue its support for inclusive growth through investments in agricultural diversification and productivity, urban and rural water supply and sanitation, and rural roads. ADB will work to attract private sector investment and public-private partnerships for large-scale hydropower and transmission projects and high-value agricultural value chains.

Nakao said it is essential to accelerate the pace of investment for reconstruction and other development programmes to achieve the country’s economic growth potential of seven to eight per cent per annum in the medium term, according to the statement. Nepal’s public capital spending has been low at an average of 3.5 per cent of gross domestic product (GDP) over the last five years compared to the eight to 12 per cent required to fill the critical infrastructure gap within a decade.

A large portion of ADB’s currently committed assistance of $1.75 billion — equivalent to six per cent of GDP — remains unspent. The government and ADB should work together to speed up project implementation, including by promoting timely and proactive decision making by project implementing agencies, as per the statement.

Implementation of projects slowed further in 2015 due to the earthquake, aftershocks, and supply disruptions in southern border districts.

“Now that the situation has normalised, the government needs to step up efforts to make up for the delayed reconstruction, as well as build fundamental capacity for project planning, implementation, and monitoring,” Nakao said. In this regard, he welcomed the recent establishment of the National Reconstruction Authority.

The Capacity Development Resource Centre at the Nepal Administrative Staff College, established in late 2015 supported by ADB’s technical assistance, will be instrumental in providing regular and long-term training to staff at agencies implementing projects and related government officials, he said.

Nakao also exchanged views with the prime minister and finance minister on the need for a long-term

socio-economic development strategy and medium-term development plan, the preparation of which the government has initiated recently.

“Enactment of the new constitution and launch of the United Nations’ Sustainable Development Goals have provided an excellent opportunity to prepare a long-term vision and development strategy for Nepal. They will help the government deepen reforms, prioritise public investment, and spur private investment in all sectors,” Nakao said, adding that ADB will continue to provide technical assistance to support this planning process.

ADB forecasts Nepal’s economy to grow 1.5 per cent in the current fiscal ending on July 15 after three per cent growth in the previous year, affected by the tragic earthquake in April 2015 and subsequent supply disruptions. ADB is expecting growth will pick up to 4.8 per cent in fiscal year 2017.