Relying too much on foreign aid
Shanker M Singh:
There is a mistaken notion that a poor country like Nepal cannot take even a step forward without foreign aid. Though aid has been pouring into Nepal, it is unfortunate that there has been no development in proportion to the volume of foreign assistance. It is against this backdrop that the talk about development through foreign aid has proved to be a mirage for the Nepalis. According to a new World Bank report, foreign aid has been highly successful in reducing poverty in countries with sound economic management and robust government institutions. However, for effective and efficient utilisation of foreign aid, greater consciousness about the utilisation and transparency of foreign assistance through advocacy and public debates is necessary. The proportion of loans has been increasing while grants have been consistently declining. We have to make an assessment of aid programme to examine the success in reducing poverty and enhancing human development. When we look at the share of foreign aid in the development expenditure of Nepal, it was about 40 per cent in 1975/76 that gradually increased and now it has reached up to 60 per cent. The share of bilateral and multilateral contributions to the total aid package also shows fluctuations. Nepal is facing the problem in low absorptive capacity because of: difficulty in accessing information, especially from the bilateral donor agencies; weak information management systems of both the government and the donors; no information available on technical assistance; glaring discrepancies in data provided by different sources like the ministry of finance, UNDP, individual donors; ample scope for misuse of foreign aid resources, and virtual absence of monitoring and evaluation systems. Moreover, the reasons for low utilisation of foreign aid to development projects are manifold that include poor aid coordination among donor community, weak project management, monitoring and controlling, insufficient financial resources allocated to maintenance and operations, leading to low efficiency and utilisation. In Nepal, almost all foreign aid is controlled, negotiated or channelled by the central government. And in the country where 70 per cent of the government’s budget is dependent on foreign aid, su-ch a central control over foreign aid makes any other arra-ngement towards decentralis-ation practically meaningless.
Nepal should create an environment that turns money into capital. Aid should complement not substitute for domestic efforts. Millions of dollars have definitely been poured into Nepal by foreign countries and agencies, but what has been achieved? Manifestations of the patronage system in government include frequent changes in senior government personnel and, until recently, reluctance to accept competent NGOs as legitimate development partners. Nepal’s prolonged economic malaise is “too much of donors’ meddling in Nepal’s national economic management. Nepal fell into the trap due to begging-mania. But for ensuring future competitiveness of the Nepali economy, we have to rely on foreign aid for sometime.
Donors’ effectiveness needs to improve through more cooperation and less competition. The World Bank and UNDP have taken an active role in overall and sector specific aid coordination, jointly chairing regular donor meetings in Kathmandu. At the next Aid Group meeting, the donors have planned to have an extended session on how donors’ rural development aid can collectively support the major elements of the Agriculture Perspective Plan, which is the cornerstone of future rural income growth.