Nepal Portfolio Performance Review

KATHMANDU, JAN 24 -

In a clear indication of slowdown in development activities in Nepal, disbursement of funds by two major donors—World Bank (WB) and Asian Development Bank ( ADB ) have declined in 2012.

The government’s poor aid absorption capacity will be one of the agenda when the donors sit down with government officials on Thursday for an annual review of the donor-funded projects at the Nepal Portfolio Performance Review (NPPR).

According to the Finance Ministry, the disbursement of WB declined by 21 percent in the fiscal year 2011-12. The resource disbursement under the International Development Association (IDA) of WB in 2011-12 was $187.10 million, down from $237.72 million the previous year. Besides disbursement, net resource transfer from WB to the government also decreased to $130 million in FY 2011-12 from $182 million the year earlier.

The other leading donor, ADB , had also reported a decrease in its fund disbursement to just $66 million, which is 56 percent of the targeted $118 million until November, 2012.

The ADB also stated that the contract awarded was also far low compared to the target. The ADB had awarded contracts worth $ 66.4 million—39 percent of the revised annual target of $171 million—for contracts awarded until Nov 23, 2012. It was a sharp comedown from what the level achieved in 2011 when the country had recorded 93 percent of the contract awards, while meeting 97 percent of the target for disbursement.

Both the donors have pointed out similar challenges such as frequent transfer of project staff, weak procurement and financial capacity and delay in budget presentation and budget approval and poor monitoring for poor disbursement of donors’ resources.

Further more, the WB has also concerns over projects’ failure to retain specialists and poor aid absorption capacity, while the ADB has pointed out problems such as increased procurement risks at decentralised level, delay in land acquisition and lack of counterpart funds due to the government’s allocation of one-third budget in the first trimester of the current fiscal year.

“The poor performance in disbursement from these big donors suggests Nepal’s poor absorbing capacity of aid,” said Madhu Marasini, chief of International Cooperation Department at the Finance Ministry. “As aid from these two donors constitutes around 50 percent of total aid Nepal receives, development activities of the country have surely been affected.”

According to Marasini, government agencies had been able to spend just $30 million of the total pledged amount from the WB worth around $ 250 million during the first half of the current fiscal year.

In this connection, the Finance Ministry on Tuesday organised a discussion on the development projects related to ministries including Education, Local Development, Physical Planning, Irrigation and Poverty Alleviation Fund where the WB’s aid is concentrated. During the meeting, Finance Secretary Shanta Raj Subedi and WB Country Manager of Nepal Tahseen Sayed asked the ministries and agencies concerned to increase disbursement in foreign-aided projects, terming progress “poor” so far. For the current fiscal year, the WB has termed the government’s failure to introduce full budget as critical problem. Due to lack of full budget, the bank pointed out, the projects have been forced to manage the work programme within the ceiling of last year’s expenditures.

Such a ground rule applied to all programmes, the WB explained, appears to be unrealistic mainly to new programmes which entered last fiscal year as they could spend very low in the first year of implementation. “This will not only affect the overall disbursement performance but will also affect accomplishment of the intended results,” the WB said.

Marasini also said that although the government had given new 25 headings for new donor-funded projects, it would be difficult to use donors’ funds as maximum limit for the government’s annual expenditure size is just Rs 351 billion.

Meanwhile, the Finance Ministry claimed that more than half of action plans fixed in the last year’s NPPR meet to improve the implement of donor funded projects have been completed so far.

“Out of 52 action plans laid out, 29 have been implemented completely,” said Kailash Raj Pokharel, under secretary at the Finance Ministry, who has been coordinating the NPPR meet from the government side.

Source: The Kathmandu Post