Aid commitment increases, disbursement still low

The last four fiscal years witnessed a continuous increment in foreign aid commitment, though the gap between commitment and disbursement has not reduced, also due to the country's low absorptive capacity.
"The country received foreign aid commitment of Rs 107.56 billion in the last fiscal year 2011-12 that ended on July 15," according to finance secretary Krishna Hari Baskota.
"Similarly, the country had received a commitment of around Rs 106 billion in fiscal year 2010-11, and Rs 96 billion in fiscal year 2009-10," he said, adding that foreign aid commitment has been increasing despite the political uncertainty.
Of the total aid commitment, the last fiscal year witnessed a disbursement of Rs 47 billion — Rs 42 billion grants and Rs 5 billion loans — on cash basis by the last week of the fiscal year, he added. "It does not include commodities and direct payment."
Similarly, grants exceeded loans as the country received a commitment of Rs 56.93 billion under grants and Rs 50.62 billion under loans.
Multilateral donors like the Asian Development Bank (ADB) and World Bank (WB) still dominate the total aid portfolio as compared to bilateral donors like India, China, Japan and the United Kingdom. "Of the total Rs 107.56 billion aid commitment, bilateral donors committed Rs 53.52 billion, whereas multilateral donors committed Rs 54.03 billion," said Baskota, adding that India, China, Japan and the UK have committed the largest aid among bilateral donors, whereas ADB, World Bank, and Climate Investment Funds are the largest multilateral donors.

"Among bilateral donors, Japan has committed the largest grant followed by China, whereas India has committed the largest loan followed by China, and among multilateral donors, ADB has committed the largest grant and loan followed by World Bank," he said.
The European Investment Bank (EIB) is the latest donor that has committed to help with the Upper Seti or Tanahun Hydropower, the finance secretary added.
However, most of the aid is directed mostly towards social sectors at the cost of productive sectors.
Foreign aid that finances more than half the development expenditure of the country, has also seen non-traditional donors lately but aid flow should be more transparent for it to be effective, according to the Paris Declaration.
"A donor's monitoring committee meets regularly every two months, besides the bilateral review and annual Nepal Portfolio Performance Report (NPPR)," informed Baskota, adding that the government is serious about increasing the effectiveness and transparency of the aid received.
In the last fiscal year, 16 bilateral donors and 13 multilateral donors committed to help Nepal, but experts have been asking the government to shift the priority to ‘aid for trade’ and ‘climate finance’ from the traditional aid to make it more effective by channelling it to productive sectors that can propel growth in the long run.

Sector wise commitment
Energy — Rs 32.70 billion
Physical Infrastructure — Rs 16.24 billion
Education — Rs 8.99 billion
Local Development — Rs 8.59 billion
Environment — Rs 8.15 billion
Drinking Water — Rs 6.24 billion
Agriculture — Rs 5.08 billion
(Sectors that received a commitment of more than Rs 5 billion in fiscal year 2011-12. Source: Finance Ministry.)

Aid commitment
2008-09 — Rs 47.97 billion
2009-10 — Rs 96.60 billion
2010-11 — Rs 106.10 billion
2011-12 — Rs 107.56 billion
(Source: Finance Ministry)