Nepal | June 16, 2019

Foreign aid commitment down 55.90pc

Himalayan News Service
Source: Ministry of Finance

Source: Ministry of Finance

Kathmandu, December 23

Foreign aid commitment from bilateral and multilateral agencies fell by 55.90 per cent in the first five months of current fiscal, as focus of donors diverted to other pressing international issues — such as the refugee crisis in Europe — and countries in Africa, where progress in social sector is slower than in Nepal.

The country received pledges worth Rs 93.37 billion from development partners in between mid-July and mid-December, as against Rs 211.72 billion in the same period last year, show the latest data of the Ministry of Finance (MoF).

Aid commitment had jumped in the last fiscal as successful Constituent Assembly election of November 2013 and installation of an elected government had buoyed donors’ confidence.

“But aid pledges may fall this year because more and more donor countries, especially those in Europe, are focusing on the refugee crisis,” MoF Under Secretary Narayan Dhakal told The Himalayan Times.

Europe is facing the biggest refugee crisis ever, with people from war-torn Syria, Afghanistan, Kosovo and Iraq, among others, fleeing their country in droves.

In 2015, more than a million migrants and refugees crossed into Europe, BBC said. “And Germany alone has received the highest number of new asylum applications, with more than 315,000 by the end of October.”

The benevolence shown by Germany, in turn, is exerting pressure on other European nations to work on behalf of migrants and refugees.

“This indicates the refugee crisis will divert donor funds in the coming months,” said Dhakal.

Another reason that is likely to bring down foreign aid commitment this fiscal year, according to Dhakal, is improvement made by the country in the social sector. “Because of this, donors are focusing more in African countries that are lagging behind in social sector development,” Dhakal said.

Despite the decade-long insurgency, Nepal has made impressive gains in the social sector, especially in education and health sectors. An example of this could be seen through the 2015 Human Development Report of the United Nations, in which Nepal’s ranking in Human Development Index went up by a notch to 145, as against the previous ranking of 146.

“Since we are on the way to becoming a developing nation because of these achievements, donors seem to be putting other countries in priority these days,” Dhakal said. Yet, he quickly added Nepal’s inability to fully utilise capital budget has also become a deterrent for donors.

Donors have always complained of Nepal’s low fund absorptive capacity because of delay in preparation of detailed project design and procurement plans, land acquisition, establishment of project management offices, budget approval and budget release. Also, weak planning and implementation capacity are affecting spending.

Because of these reasons, Nepal has not been able to enter into agreements with many donor countries and agencies that had pledged aid during the international conference held two months after the devastating earthquake of April 25. Donors had pledged a fund of $4.4 billion (approximately Rs 440 billion) during the conference held on June 25.

Of this amount, agreements worth only Rs 79.62 billion, including loans and grants, were signed in the first five months of the current fiscal.

This includes commitment of the World Bank to provide a loan of Rs 30 billion for Financial Sector Action Support and the Implementation of the Earthquake Housing Reconstruction Project. The International Development Association (IDA), the World Bank’s Fund for the Poorest, has also signed an agreement to extend a loan of Rs 20.66 billion for the Earthquake Housing Reconstruction Project.

Similarly, the Asian Development Bank (ADB) has signed agreements to provide loans and grants worth Rs 31.11 billion. Of this amount, Rs 21.57 billion is related to post-earthquake reconstruction and rehabilitation, while Rs 9.54 billion is being offered for the Kathmandu Valley Water Supply Improvement Project.

Among others, Germany has pledged to provide Rs 2.89 billion for recovery programmes in the aftermath of the quakes.


A version of this article appears in print on December 24, 2015 of The Himalayan Times.


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