Following the February 1 Royal step, the establishment has had cause for worry over the prospect of suspension of foreign aid, because the country depends heavily on aid. Most of the donors, particularly the bilateral ones, have announced a review of their aid programmes in Nepal, linking them to the restoration of the democratic processes and fundamental freedoms. A couple of countries, Denmark and Switzerland, have halted some of their development programmes. The United Kingdom has suspended its military assistance to Nepal while India and the United States, though they have not suspended military aid, have said they have not supplied military aid to Nepal since February 1. India has, however, made it clear that it will continue its development aid.

It seems that multilateral donors will continue aid and bilateral donors, with exceptions, will do so too. Japan, Nepal’s single largest provider of development aid, has just agreed to provide a grant assistance of Rs.1.2 billion to Nepal during the Japanese fiscal year 2004. The establishment seems to attribute whatever uncertainty there is about aid mainly to the failure of Nepal’s diplomatic machinery to convince the international community that aid suspension is not desirable because the February 1 step is aimed at ‘ending terrorism, restoring peace and consolidating democracy.’ This view of inadequate diplomacy may be true to a certain extent, because even democratic countries are not bothered much about democracy and human rights in other countries. For the US these concepts have been a tool for furthering its strategic interests, by punishing unfavourable regimes and often ignoring violations by favourable ones. Most of the European democracies, particularly Scandinavian countries, however, show greater concern.

To continue or halt aid is the discretion of donors. The world will benefit only if decisions on these matters are based on principles and criteria rather than on the donors’ ‘strategic interests.’ Though initially finance minister Madhukar Rana talked of mobilising internal resources to make up for the loss in foreign aid, he has now returned from Paris after discussing the issue with Nepal’s development partners. The message he has carried home is that the donors will continue aid provided Nepal implements reforms effectively. To make it easier for the donors to continue aid, lifting of certain curbs and restoration of most of the fundamental rights may be stressed. Efforts are likely to be made by powerful quarters to reconcile the two constitutional forces in order to defuse the crisis. Yet the shape of things to come is not certain. What is certain, however, is that Nepal cannot do without foreign aid.