Government signs Rs 17.27 billion worth foreign aid
The care-taker government has signed Rs 17.27 billion foreign aid agreement in the first two months (Shrawan and Bhadra) of the current fiscal year. "Out of the total aid, Rs 9.24 billion is grant and almost the half Rs 8.02 billion is loan," according to the finance ministry. However foreign aid mobilisation with a demand driven approach towards the prioritised sectors has been a key challenge. "To coordination and effective mobilisation of foreign aid, the finance ministry has finalised manual for 'the High level committee on coordination and mobilisation of foreign aid'," the ministry said. The committee -- led by the finance minister -- will take stock of the relevence of foreign aid that is one of the key component of the public expenditure. Though it was envisioned first in the Foreign Aid Policy 2002, the committee has been formed after a survey last year reported that the foreign aid coordination and mobilisation could not be as effective as it should be. "Apart from formation of committee, the ministry has also started reviewing the Foreign Aid Policy that is nine years old and need urgent revisit," the ministry said. The Foreign Aid Policy states that it will rank development sectors with their priorities in achieving self-sustained economic growth and alleviation of poverty; deepen the interrelationships of priorities; separate the project identification from the potential funding source until final selection; mobilise aid resources systematically according to development approach; streamline and limit the task of project identification at the levels of beneficiaries, line agencies and the National Planning Commission (NPC) and inform the donors about the national priority sectors and projects/programmes regularly. But there has been duplication in some of the programmes and government could also not develop its absorbing capacity, said the Finance Ministry source. "For the maximum utilisation, foreign aid has to be utilised on the projects Nepal owns," he said adding that the commitment could help government plan resources for this fiscal year. "In the last fiscal year, foreign aid had a contribution of around 30 per cent in the total budget." Nepal had received almost double to almost Rs 92,288.48 million foreign aid commitment -- including loan and grants from bilateral and multilateral agencies -- in the last fiscal year compared to 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 in 2009-10, whereas it was Rs 47,975.23 million a fiscal year ago. "But the more foreign aid means, the country will be less economically free," said former secretary and senior economist Dr Bhola Chalise. Nepal ranks among the least free economy in the World Economic Freedom report that has ranked Nepal at 121 among the 141 global economies. However, foreign loan has been playing key role in the domestic 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 of fiscal year 2009-10 had targetted Rs 78.51 billion in foreign assistance that was 27.45 per cent of the total budget of Rs 285.93 billion.