Govt to bridge gap between foreign aid commitment and disbursement

Kathmandu, September 1

The Ministry of Finance will negotiate with Asian Development Bank tomorrow to mobilise around $186 million assistance from the Manila-based multilateral bank for South Asia Subregional Economic Cooperation Road Connectivity Project.

While the MoF has held such negotiations with development partners earlier, this is the first time the officials are sitting for talks equipped with necessary information regarding project readiness.

For this, the International Economic Cooperation Coordination Division under the MoF had sought details regarding preparations made for project implementation (project readiness) from the Ministry of Physical Infrastructure and Transport for which it is seeking resources. Hence, MoPIT — the executing agency of the aforesaid project — had submitted the details of the ground work completed so far for project implementation.

Finding the project preparation satisfactory, the MoF has decided to sit for negotiations with the development partner, informed Baikuntha Aryal, chief of IECCD.

“We have begun inquiring about readiness of the projects proposed by the ministries to minimise the trend of seeking funds for projects without any preparatory work for implementation.”

According to him, starting this fiscal, the government will seek resources for only those projects that are ready to be implemented.

“Lack of project preparation is the major cause for huge gap in foreign assistance commitment and disbursement — meaning, commitment of foreign aid is high but the actual realisation is low,” Aryal explained, adding that the new move is aimed at bridging the gap.

In more than one instance, the assistance pledged by the donors has remained idle for years due to lack of project readiness. The general trend, until now, has been for the ministries that execute the development projects to seek necessary funds to implement a project even before making any preparation like feasibility study of the project. Consequently, years go by after signing the agreement with the donor agency before necessary processes like feasibility study, land acquisition, right of way clearance, detailed project report and environmental impact assessment are carried out and the physical works of the project can begin.

For example, the government had received funding commitment of $1.25 billion from the ADB by the end of fiscal year 2015-16. However, the country has hardly utilised around 30 per cent of the total commitment. The major cause for the low disbursement, as identified by the MoF, is lack of project preparation.

Moreover, as the projects don’t start on time, the government needs to repeatedly request the development partners to extend the project completion period.

MoF’s strategy of not seeking resources for projects that are not ready for implementation will also support in establishing a project bank. “Ministries should complete all the ground works for which the government allocates a budget before seeking resources to implement the projects and the MoF will not budge from this stance,” asserted Aryal.