Failure to utilise foreign aid costs government Rs 33 million
KATHMANDU, APR 15 -
Nepal has paid a huge amount to donors as commitment charges for its failure to utilise the donors’ loans.
For fiscal year 2011-12, Nepal paid as high as Rs 33 million in commitment charges to donors, according to the latest 50th annual report of Office of Auditor General (OAG).
A lender charges commitment fee to a borrower failing to utilise the loans because the former has to hold the committed amount for a longer period without investing. The report says Nepal failed to mobilise the loans meant for five projects as per the agreements signed with the donors.
The government paid Rs 28.6 million to China Exim Bank for failure to utilise the loans to Upper Trishuli Hydropower Project and 132KV Transmission Line for the same project. Rest of the amount was paid to Nordic Development Fund and India Exim Bank for failure to utilise their loans for Melachmi Drinking Water Project. “This shows despite its availability, we are weak in absorbing foreign aid ,” said Madhu Marasini, chief of international economic cooperation division at the Finance Ministry.
An official at the Financial Comptroller General Office (FCGO), which keeps records of the government’s income and expenditure along with foreign aid , said not only in loans, such fees are also charged on grants too based on the agreement. “Basically, multilateral donors charge such fees,” said the FCGO official. “But in some cases, the donors cancel such charge.”
The OAG report also said loans taken for 22 projects were poorly utilised because the agreements were signed without identifying and evaluating whether the loans were necessary. In some projects, up to 97 percent of the loans could not be mobilised. In a helicopter purchase project, 96.85 percent of the French loan was not utilised, while 85.21 percent of the loan provided by the International Fund for Agriculture Development for ‘Agriculture Development Project’ was not utilised.
The country also failed to utilise more than 70 percent of the loans provided by International Development Association (IDA) to Second Forestry, Urban Water Supply and Sanitation, Rasuwa-Nuwakot Rural Development-II and Hill Community Forest projects. IDA is the World Bank’s funding agency for the poorest.
Baburam Gautam, spokesperson for OAG, said the loans could not be utilised as they were taken without adequate study on possible obstacles to project implementation. “Even no study has been conducted on whether the country needs the projects,” he said.
However, Marasini denied that loan agreements were signed without their need. “The loan agreements are signed only after project documents are prepared after holding study,” said Marasini. He, however, admitted that there might be shortcomings in the study itself for overlooking certain issues that should have been considered.
The government’s failure to mobiles foreign aid is also evident with the fact that only 47.78 percent of the foreign aid was spent in the last fiscal year. According to the OAG report, spending of foreign loans stood at 37.37 percent of total allocated Rs 29.65 billion. Of the total allocated grants of Rs 70.13 billion, only 58.19 percent was spent last fiscal year. The resources allocated from the government has, however, been spent more than cent percent, the report says.
“Government offices tend to spend domestic resources even for work that should be executed through foreign resources and later demand reimbursement from donors,” said Marasini.
“But failure to demand timely reimbursement resulted in delay in recovery of foreign aid which has been reflected in the report.”
Top five projects with least foreign loan utilisation
Project name Donors non-utilization
Helicopter purchase France 96.85%
Agriculture Dev Project IFAD 85.21%
Second Forestry IDA 79.67%
Urban Water Supply & Sanitation IDA 76.26%
Rasuwa Nuwakot Rural Dev-II IDA 75.78%
(Source: Office of Auditor General/ The Kathmandu Post)
