Govt, WB to launch negotiations on $30m budgetary support

KATHMANDU, MAY 26 -

The government and the World Bank (WB) will start negotiation s on Monday on the proposed soft loan worth $30 million from the latter. The country is expected to get the loan as a budgetary support.

A donor budgetary support is spent by the government in needy areas. But the proposed WB support will come as the financial sector stability credit for reforming the financial sector.

The credit is being taken particularly to support the “Medium Term Financial Sector Reforms Programme”, under which tasks such preparation of a long-term financial sector reform strategy, increasing people’s access to financial services and recapitalisation of Nepal Rastra Bank and Rastriya Banijya Bank are being carried out, according to the Finance Ministry.

Other tasks under the programme are identifying and banks and financial institutions (BFIs) facing risks and mitigating the risks, solving problems in the banking sector “in a modern way”, preparing legal basis for stronger supervision of BFIs, introducing new Nepal Rastra Bank Act and Banks and Financial Institution Act and formulating measures against money laundering.

The ministry said the proposed aid, however, will not be confined to supporting activities under the “Medium Term Financial Sector Reform Programme”, and the government will be free to spend anywhere it finds necessary.

Finance Ministry Joint Secretary Baikuntha Aryal, who is heading the government ’s negotiation team, said the ministry has planned to end the negotiation as soon as possible so that the WB board meeting to be held on June 27 could endorse the proposed credit. “We have planned to incorporate the proposed aid from the World Bank in the next fiscal year’s budget,” he said.

The two sides were working on a budgetary support worth $100 million for the Nepal government for the last two years. And, the proposed aid of $30 million is the first instalment of budgetary support, Aryal said. “The maximum size of the support has not been finalised and will depend on the negotiation between the two sides in the future,” he said.

A World Bank official said it is a one-time support and the two sides have to negotiate again to take another similar aid in the future. “As it is a budgetary support, the government can take it based on the need for each year’s budget,” said the WB official.

Source: The Kathmandu Post