Finance Minister Dr Baburam Bhattarai, who recently presented the country’s largest national budget so far, with a projected total outlay of Rs.236 billion and estimated foreign assistance of Rs.64 billion, sought, on October 11, Rs.34 billion (US$450 million) in budgetary support from the World Bank to finance Nepal’s education, health and other social sectors. Though the CPN-Maoist has made a commitment to free enterprise, it has held that the government should play a much more important role than currently in the delivery of education and health services. Bhattarai requested the assistance during his meeting with Ngozi Okonyo Iweala, the Bank managing director, and Isabel Guerrero, the Bank vice-president for South Asia. The Bank may well provide the assistance provided its conditions, which number about a dozen, are met. The main thing is the implications the fulfilment of these conditions may hold.

Most of the conditions of the multilateral agencies, such as the World Bank and the International Monetary Fund, are stringent, which do not necessarily seek better utilisation of aid and maximum impact of the aid on the target population. But donors have often tended to meddle in the recipient’s economic policy, and through it to exert considerable control over the government and national politics. That is why Nepali budgets over the past years have considerably reflected donors’ conditions. The US, which has adopted the policy of engagement with the Maoists while keeping a ‘close watch’ on their activities, may not take the CPN-M off its terror list very soon for obvious reasons. Pursuit of its perceived national interests, rather than any higher principles, sways its decision. The latest example is the US compulsion to take its terror tag off North Korea, which falls in George Bush’s Axis of Evil, because the communist nation held its nuclear card open.

The American reference is pertinent because, though US economic aid to Nepal may well be called peanuts, the superpower wields tremendous influence over aid decisions of multilateral donors, who, in their turn, tend to set the pace for important bilateral donors. The emerging donor-Maoist relationship will constitute a test case for both - whether the Maoists can win donor trust without losing their identity, and whether the donors will be particularly harsh on the Maoists, unlike its treatment of past non-communist governments. The donors’ main concerns should be proper utilisation of aid, which automatically takes care of the questions of whether the implementation has been corruption-free, benefited the target groups by and large, and the government has demonstrated the capacity to spend, and spend well. Besides, all moneylenders have a legitimate concern whether they will receive back their money in timely instalments. So far as these considerations are met, other conditions will increasingly look like unnecessary encroachments on the internal affairs of recipient countries. But economic aid to developing countries has often been guided by other motives, including, of course, political ones. It would be a surprise if most of the big donors became disinterested givers, that, too, to a communist-led government.