Donor aid fragmentation raises govt eyebrows
KATHMANDU:
Each donor agency operating in the country, on average, is dealing with nine ministries or government agencies to implement various projects, indicating high level of fragmentation of foreign aid, says the latest Development Cooperation Report released today by the Ministry of Finance (MoF).Although the impact of aid fragmentation has not been properly studied by the government, the Organisation for Economic Cooperation and Development (OECD) has said aid that comes in too many slices from too many donors raises transaction cost and makes it difficult for partner countries to effectively manage development.
In the last fiscal year that concluded in mid-July, the European Union, for instance, was dealing with 21 ministries or government agencies to implement 75 projects, says the MoF report. In the same year, agencies of the United Nations were working with 23 ministries or government agencies to execute 74 projects. The Asian Development Bank, meanwhile, was dealing with 17 ministries or government agencies to implement 69 projects.
“Such fragmentation of aid only raises administrative expenses and cost of project implementation,” Finance Minister Ram Sharan Mahat said, urging development partners to concentrate on bigger and limited number of projects.
Lately, the government has been discouraging development partners from scattering aid in smaller projects to enhance effectiveness of aid and ensure efficiency in aid disbursement.
In this regard, the government has stopped accepting grant assistance of less than $5 million, concessional loan of less than $10 million per standalone project and other loan assistance of less than $20 million
per project or programme, except in special cases.
So, development partners should channel resources towards selected sectors where they have comparative advantage, says the report.This, however, should not mean there is fragmentation in aid disbursed by all development partners.
The OPEC Fund for International Development, for instance, channelled 88.8 per cent of $6.73 million in aid that it disbursed in the country last fiscal towards local development, shows the MoF report. Similarly, 79 per cent of the total aid of $47.79 million disbursed by India and 76.1 per cent of the total aid of $19.42 million released by Finland last fiscal went towards local development.
Among others, 70.1 per cent of the total aid of $41.38 million disbursed by China was channelled towards tourism sector and 51.1 per cent of the total aid of $40.59 million released by Japan last fiscal went towards road transportation sector.
In the last fiscal, various multilateral and bilateral donor agencies disbursed $1.04 billion in aid, up eight per cent from $959.95 million of the previous fiscal.
On top of this, the country also received $76.08 million from international non-governmental organisations (INGOs) in the last fiscal. Data on funds disbursed by INGOs in the previous fiscal is not available as many of them did not have a practice of submitting reports to the government.
Of the total aid disbursed by development partners last fiscal, 66 per cent was in the form of grants, 18 per cent in the form of loan and 16 per cent in the form of technical assistance.
“This means only 18 per cent of the fund received from development partners in 2013-14 has turned into liability for the government,” Minister Mahat said.development partners of 2013-14
Top Five
• World Bank Group - $276.77m
• Asian Development Bank - $155.55m
• United Kingdom - $151.13m
• European Union - $51.62m
• India - $47.79m
aid recipients (sector-wise)
• Education - $175.05m
• Local Development - $152.34m
• Health – $115.72m
• Energy – $58.22m
• Road Transportation – $51.57m
Source: THT
