Loan pledges surpassed grants in last fiscal year
KATHMANDU, SEP 19 -
Loan commitments from donors surpassed grants during the last fiscal year 2012-13, with the infrastructure sector once again taking the top spot in the government’s list of priorities.
According to the Finance Ministry, loan pledges reached Rs 61.25 billion against grant commitments of Rs 53.90 billion. Loans accounted for 53.2 percent of the total commitments of Rs 115.15 billion.
The higher loan commitments to the energy sector contributed to loans surpassing grants in terms of commitments in the last fiscal year. According to the ministry, the energy sector alone received loan commitments of Rs 37.19 billion. Pledges to the Tanahun Hydropower Project alone reached Rs 33 billion during the last fiscal.
Foreign grant assistance has been gradually increasing over the last decade while loan aid declined until fiscal year 2011-12, according to the Development Coopera-tion Report 2011-12 prepared by the ministry. Out of the total disbursements in 2011-12, grants represented 60 percent while loans accounted for 25 percent, the report said.
“The priority given to the infrastructure sector and the Asian Development Bank (ADB) deciding to give only loans to Nepal mainly contributed to the increase in loan commitments,” said Madhu Marasini, chief of the international economic cooperation coordination division at the ministry. The ADB is one of the largest donors to Nepal.
“Foreign aid has usually come for the infrastructure sector in loan form while grants have been provided to the social sector,” Marasini said. “With the focus on infrastructure including hydropower, the size of loan commitments has grown.”
The size of foreign loan pledges swelled to Rs 50.62 billion this year while grant commitments amounted to Rs 56.93 billion during fiscal 2011-12. Marasini believes that the country would need more loans to invest in the infrastructure sector if the country heads towards stability. Former vice-chairman of the National Planning Commission (NPC) Jagadish Chandra Pokharel said that Nepal should not fear the increased amount of loans if they are soft loans with low interest rates. “The government can have a greater say in fixing the priority and utilization of the loans, and it also does not carry more technical assistance like grants,” he said.
He added that increased aid to the infrastructure sector was good, and that loans could be accepted even for infrastructure and research and development in the social sector.
Meanwhile, outstanding foreign debt to the Gross Domestic Product (GDP) is 17.6 percent in fiscal 2012-13, down from 45.4 percent in fiscal 2002-03. The country’s total debt including both foreign and domestic is 30.1 percent against the GDP. Considering the decreased level of indebtedness, the ADB decided to give only loans to Nepal. “There is still scope for Nepal to receive more loans due to the low level of indebtedness,” said Marasini.
Source: The Kathmandu Post
