No virtue in itself

There is not much difference of opinion among experts that a lion’s share of the aid Nepal has received during the past half-century has gone waste. And Nepal has received much less than the amounts committed by the donors. Among the reasons cited for the second fact are the stiff conditionalities, a weak implementing mechanism and a low absorptive capacity of the government. According to statistics, only about half the aid commitments have aterialised. While per capita aid for Nepal is reported to be greater than that for any other South Asian country, the same cannot be said about its efficiency. Sometime during Panchayat era when Dr Bhekh Bahadur Thapa was finance minister, a shift from direct grants to loans was discerned in the name of cutting the country’s dependency that grants-in-aid were perceived to promote.

Increasingly, questions of transparency of foreign aid have been raised, but little has been done to move towards that state. Even records of the foreign assistance to Nepal are said to be incomplete. It may well be argued that lower aid disbursements than commitments hinder development. But the outcome of what has actually been received is far from satisfactory. Some economists here think that the country should get aid without any strings attached. However, the absence of conditionalities does not necessarily benefit the Nepali people, as officials and politicians would get a freer hand in using, rather misusing, the money. It is another thing to suggest that harsh conditionalities can be counter-productive. But donors cannot be said to be harsh if they seek to ensure efficient utilisation of aid and plug leakages. It would not be improper on their part even to reduce or stop aid if it is not seen to benefit the common people.

On top of all this, the eight-year-old Maoist insurgency has injected a new factor into development, as the establishment is bent on suppressing the insurgency. As a result, security expenses are ballooning; even development budget and aid money is being diverted for security purposes; and economic activity is in the doldrums. In such a situation, more local and foreign investment and a stimulation of the Nepali economy cannot be thought of. Even donors are reported to be confused about how the aid money is being used at present. Meanwhile, the one-month-long consultations of the Nepal Development Forum, which draws together 23 bilateral and multilateral donors, continue in Kathmandu in preparation for its meeting in May this year. Good aid utilisation is unlikely without good governance, which, in turn, requires a truly accountable government. So aid is not a virtue in itself; it depends on how it is used. This has become a major issue in Nepal right now.