TOPICS : Foreign aid and poverty alleviation

The past century witnessed human progress through the evolution of foreign aid in furtherance of sustainable development. Much has been learned during that time and much accomplished. Ever since, we have witnessed extended lifespan, eradication of countless diseases, increase in literacy rates and considerable improvement in income level and overall quality of life. However, not all have shared in this remarkable progress.

The history of foreign aid in Nepal dates back to 1968 BS when the Pharping Hydroelectric Project was established under the auspices of the erstwhile East India Company. The institutional flow of foreign aid started with US aid in 1951 AD when the four-point agreement was signed between Nepal and the United States. Aid flow increased after Nepal became a member of the United Nations in 1955 AD.

In recent years, the pattern of foreign aid has changed with loans outweighing grants. It is estimated that close to 60% of foreign aid goes back to donor countries in the form of consultancy or expatriate costs. This is not to mention politicians, bureaucrats and project staff who take away big shares of total budget of the projects. As a result, the aid hardly reaches the needy.

Foreign aid, under the benign guise of helping various kinds of development projects, has aggravated corruption. Most projects are in a shambles because of unbridled corruption. There is no proper accounting system for recording the movement of foreign aid. In this regard, the World Bank has linked the granting of aid to its proper use and satisfactory programmes in social and economic development. To retain the trust of donors and to maximise aid utilisation, the government should develop mechanisms and take initiatives for the realisation of its major objectives.

In fact, donors have their own policies, priorities and strategies regarding aid disbursement and utilisation. Therefore, Nepal needs to have a clear policy, priorities and strategy on foreign aid. The government must focus all its attention on certain priority areas. One of the main programmes of the past government and also the present one, has been poverty alleviation. Poverty is a major problem for this country. It affects the majority of the people, especially in the rural areas. Furthermore, illiteracy, lack of resources and poor access to transportation and communication only worsen the bleak scenario. It has become a big challenge to take poverty alleviation programmes to every nook and cranny of the country.

In many countries, including Nepal, there is concentration of development activities only in urban areas. If people are to be freed from the clutch of poverty in real sense of the term, the fruits of development must trickle down to the grassroots level. In this regard, decentralisation is significant. Decisive measures are required to ensure that local governments develop capacities to utilise their budgets and resources and also to handle local development projects. For this purpose, foreign aid can play an important part.