Aid disbursement from donors on the decline

KATHMANDU, APR 22 -

Actual aid disbursement from donors is on the decline.

The disbursement in last fiscal year was $0.96 billion compared to $1.04 billion of the previous year.

In fact, last year’s aid disbursement was the lowest since 2010-11, when the government had received $1.08 billion from donors.

And, this is despite the fact that donors’ commitments had increased to $1.56 billion in the last fiscal year from $1.21 billion in 2011-12.

The overall aid disbursement was affected especially due to the decline in disbursement from multilateral donors.

The latest Development Cooperation Report (DCR) shows except for Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM), disbursements from all leading multilateral donors declined in the last fiscal year.

“There has been a noticeable decline in disbursements form the World Bank Group and the Asian Development Bank in 2012-13,” states DCR.

The World Bank Group’s disbursement declined by $38.20 million, while that of Asian Development Bank decreased by $92.19 million.

Of the total disbursement, 49 percent was received from multilateral donors, while 51 percent came from bilateral donors. The report shows grants continue to dominate the aid disbursement volume. Of the total amount disbursed, the share of grants was 61 percent ($582.9 million), loans 18 percent ($177 million) and technical assistance 21 percent ($199.03 million).

But the case is opposite with bilateral donors, whose disbursement increased in the last fiscal year. Disbursements from United Kingdom, Japan, India, Switzerland and USAID increased last year.

Finance Ministry officials acknowledge the decline in aid disbursement reflects weaknesses in the government’s aid absorption capacity.

“The disbursement was hit due to budget turmoil,” said Madhu Marasini, chief of the ministry’s international economic cooperation coordination division. “In the last few years, our budget planning system has become the victim of political transition.”

Although government officials blame impediments in the budget planning in the last few years for slow disbursement, donors

say Nepal needs to overcome structural inefficiencies in the budget process. “Nepal is yet to come to grips with deep structural inefficiencies in the process of budget planning, formulation and execution,” said Rajeeb Upadhya, external affairs specialist at the World Bank.

Donors say aid disbursement has direct link with the government’s performance.

“When the government system slows down, it is only natural that the disbursement of on-budget donor assistance will also slacken,” said Upadhya.

Development spending in the first nine months of the current fiscal clearly shows how slow the government system has become.

As of April 10, the government has been able to spend just 46 percent of allocated budget, while capital expenditure stands at just Rs 25.55 billion, 30 percent of the allocation.

Thanks to slow development spending and rising revenue collection, the government’s treasury has swelled to Rs 86 billion.

In fact, Nepal is the only country in South Asia witnessing a budget surplus, according to a recent World Bank report.

Marasini agrees there are problems in the decision making process of the government’s implementing agencies. “The onus lies with us to correct it,” he said.

Source: The Kathmandu Post