Amid the failure of the two-yearly Nepal Development Forum to take place since the meeting of 2004, the government is trying to organise a donors’ consultative meeting next month. The representatives of Nepal’s important multilateral and bilateral donors are expected to take part in the weeklong event. The government is desperate for funds to bridge the widening gap between its recurrent expenditure and its revenue. In the first five months of the current fiscal year, it has overdrawn from the Nepal Rastra Bank and borrowed to levels that approach the whole year’s limits. The perennially negative trade deficit has widened further, and the balance of payments has gone into red for the first time in five years. The government’s foreign reserves have reached worryingly low levels. The recent

necessity of exchanging hard currency for the Indian rupee continues, with a new intensity. Besides, the general price level has shot up by 20 per cent during the first four months. As official data and experts’ analyses suggest, if the government could fully meet its current expenditure out of its internal revenue alone this year, it might as well take this as a matter of some satisfaction.

Against this backdrop, the finance ministry, unsurprisingly, is in haste to bring in as much aid as possible to overcome its cash crunch, and to carry out the Three-Year Interim Plan. It has also already requested donors to provide certain aid that the government may spend in whatever way it may think fit. The lengthening political transition because of postponements of the Constituent Assembly election has adversely affected aid inflow. The donors appear somewhat wary of loosening their purse strings, because, most probably, they want to see that the political direction of the country satisfies them. The reported fall of 32 per cent in the disbursement of foreign grants during the four months (July-November) explains this, despite official reports of increasing donor commitments. Any further delay in holding the polls is certain to exact a heavy economic price from the country.

Sadly, the donors have often followed extraneous considerations in making aid decisions for Nepal. Most of the tens of billions of rupees of aid the country has received over the years have, it is generally agreed, gone into the sands. A considerable proportion of it has proved unproductive or without significant positive impact. Seminars, foreign trips, study projects, and similar causes have generally received undeservedly high priority. Not the least important are the largely justifiable charges that a considerable part of the aid has found its way back into the donor countries in forms such as foreigners’ fat salaries and consultancy fees, and that not much accountability has been exacted from officials and politicians, despite the fact that the level of misuse of foreign aid in Nepal is alarmingly high. While effective and proper utilisation of aid should, logically, form the main yardstick for continuing, increasing, decreasing, or withholding aid, the donors’ other, mainly political, priorities may lead to questions of motive.