Government aims at Rs 110 billion aid commitment

Finance Ministry has expected Rs 110 billion foreign aid commitment within the current fiscal year, but without institutionalisation of foreign aid management, it will lack effectiveness as usual.
Launching the Detailed Action Plan for Dr Baburam Bhattarai’s much-ambitious Immediate Action Plan for Economic Development and Prosperity, finance secretary Krishnahari Baskota has said that the Foreign Aid Department of Finance Ministry will work towards increasing bilateral and multilateral aid and get commitment for Rs 110 billion in the next six months.
"The department will also work out new Foreign Aid Policy within two months to involve development partners in the country’s economic development,” he said, without elaborating how the country in transition will absorb the aid, as without increasing aid absorption capacity, the commitment on aid will neither help boost development activities and propel growth nor generate employment and reduce poverty.
The country has received increased commitments in recent years, according to Prof Dr Bishwambher Pyakuryal. "However, the government, on one hand lacks capacity to spend and on the other, lack of institutionalisation has made the aid ineffective," he said, adding that there should be a permanent institution under every ministry to monitor aid for its effective utilisation and output.
The country has received 10 times more loan in just three years time, whereas grant has seen slow increase from 2008-09 to 2010-11.
"Foreign aid mobilisation with a demand-driven approach towards the prioritised sectors has been a key challenge in the recent years proving that getting commitment is not enough," Pyakuryal added.
According to the figures of the Finance Ministry, there has been a huge gap in aid commitment and disbursement due to lack of absorptive capacity.
The country had received aid commitment of Rs 106.10 billion — including grant and loan — in the last fiscal year. But according to the central bank, the country has received only Rs 26.21 billion foreign grants on cash basis, which was a mere 3.9 per cent increment compared to a fiscal year ago.
Similarly, the country had received Rs 96.60 billion commitment — including loan and grants from bilateral and multilateral agencies — in the fiscal year 2009-10, but it had received only one fourth of the commitment that stood at Rs 25.23 billion grant only, according to the central bank data.
The figures revealed that disbursement of the committed aid has not been encouraging.
According to the central bank, the country has, in the first five months of the current fiscal year 2011-12, received foreign cash loans of Rs 1.23 billion and cash grants of Rs 15.40 billion, whereas signed commitments worth Rs 58.82 billion in the first five months of the current fiscal year.


The increasing commitment
Fiscal Year — Grant — Loan — Total
2008-09 — Rs 43.09 billion — Rs 4.87 billion — Rs 47.97 billion
2009-10 — Rs 70.25 billion — Rs 26.35 billion — Rs 96.60 billion
2010-11 — Rs 64.73 billion — Rs 41.36 billion — Rs 106.10 billion
(Source: Finance Ministry)