Foreign aid commitment hits record high

Nepal received almost double to around Rs 100 billion foreign aid commitment in the last fiscal year compared with 2008-09.

At a time when the government's absorption capacity is under doubt, the country received Rs 92,288.48 million foreign aid commitment -- including loan and grants from bilateral and multilateral agencies -- in the fiscal year 2009-10, whereas it was Rs 47,975.23 million a fiscal year ago, according to the Foreign Aid Department at the Finance Ministry (MoF).

"Though, it can not be compared, the foreign aid commitment is huge," said Lal Shanker Ghimire, chief of Foreign Aid Department at the Finance Ministry.

However, the experts are seriously concerned over Nepal's capacity to utilise the aid. "Nepal has been unable to utilise foreign aid in the past few years," said former member of the National Planning Commission (NPC) Dr Posh Raj Pandey.

Out of the total commitment, Rs 25,823.24 is loan from multilateral agencies -- World Bank (Rs 13,492.33 million) and ADB (Rs 12,330.91 million), whereas the remaining Rs 66,465.24 million is grant. "Nepal needs to develop absorbing capacity for the maximum utilisation of the aid," he added.

"For the maximum utilisation, foreign aid has to be utilised on the projects Nepal owns," he said adding that this commitment could help government plan resources for the new fiscal year.

However, the foreign aid commitment in the fiscal year 2008-09 has registered a dismal growth of 2.5 per cent compared with 32.9 per cent in its immediate preceding year.

In monetary term, committed foreign aid was limited to Rs 47,975.3 million in 2008-09 from Rs 49,186.2 million in 2007-08. "Of the total foreign aid commitment for 2008-09, bilateral assistance constituted Rs 27,196.5 million, whereas the multilateral assistance totaled to Rs 20,778.8 million," according to the MoF.

Similarly, bilateral assistance constitutes Rs 36,001.41 million, whereas multilateral assistance constitutes Rs 56,287.07 million in the fiscal year 2009-10.

While classifying the foreign aid into grant and loan components for the year, grants amounted to Rs 43,095.7 million and loans to Rs 4,879.5 million in 2008-09. Foreign grants have increased by 4.9 per cent whereas loans have decreased by 39.9 per cent compared with a fiscal year ago.

Foreign loan has been playing vital role in the Nepali economy. The net outstanding foreign loan totaled Rs 249,965.4 million in the fiscal year 2007-08, which further increased by 10.8 per cent reaching Rs 277,040.4 million in 2008-09.

The budget for the fiscal year 2009-10 has targetted Rs 78.51 billion in foreign assistance -- including grant and loan. It was 27.45 per cent of the total budget of Rs 285.93 billion.

Last budget's target

Total budget -- Rs 285.93 billion

Foreign assistance -- Rs 78.51 billion

Foreign grant -- Rs 56.95 billion

Foreign loan -- Rs 21.56 billion