Govt aims at Rs 110bn aid commitment

KATHMANDU, FEB 20: 

Finance Ministry has expected a foreign aid commitment of Rs 110 billion in the current fiscal year, but without the institutionalisation of foreign aid management, it will lack effectiveness as usual.

Launching the Detailed Action Plan for prime minister Dr Baburam Bhattarai’s much-ambitious Immediate Action Plan for Economic Development and Prosperity, finance secretary Krishnahari Baskota has said that the Foreign Aid Department of the Finance Ministry will work towards increasing bilateral and multilateral aid and receive a commitment for Rs 110 billion in the next six months.

“The department will also frame a new Foreign Aid Policy within two months to involve development partners for the economic development,” he said, without elaborating on how the country which is in transition, will absorb the aid, because without increasing the capacity to absorb aid, the commitment on aid will neither help boost development activities and propel growth, nor generate employment and reduce poverty. The country has received increased commitments in recent years, according to Prof Dr Bishwambher Pyakuryal. 

“However, the government, on one hand lacks the capacity to utilise aid and on the other, lack of institutionalisation has made aid ineffective,” Pyakuryal said, adding that there should be a permanent institution under every ministry to monitor aid for effective utilisation and output. 

The country has received 10 times more loans in just three years, whereas grants have been gradually increasing from 2008-09 to 2010-11. “Foreign aid mobilisation with a demand-driven approach towards prioritised sectors has been a key challenge in recent years proving that receiving a commitment is not enough,” Pyakuryal added.

According to the figures of the Finance Ministry, there has been a huge gap in aid commitment and disbursement due to the lack of absorptive capacity. The country had received an aid commitment of Rs 106.10 billion — including grants and loans — in the last fiscal year. 

But according to the central bank, the country has received only Rs 26.21 billion foreign grants on cash basis, which was a mere 3.9 per cent increment compared to a fiscal year ago. Similarly, the country had received a commitment of Rs 96.60 billion — including loans and grants from bilateral and multilateral agencies — in the fiscal year 2009-10, but it had received only one fourth of the commitment that stood at Rs 25.23 billion grants. 

The figures revealed that disbursement of the committed aid has not been encouraging. Nepal, in the first five months of the fiscal year 2011-12, received foreign cash loans of Rs 1.23 billion and cash grants of Rs 15.40 billion.

Source: THT