Thursday, September 26, 2013

ADB might reduce aid worth $90 million to Nepal

The country could lose aid from Asian Development Bank (ADB) as its performance rating has dropped due to underutlisation of development aid.
The multilateral donor has warned to reduce $90 million, if Nepal fails to expedite project implementation and address issues related to fiscal discipline, according to the ADB.
“Nepal will lose $90 million financial assistance from the ADB in the next two years, due to its failure in addressing issues relating to slow disbursement, financial discipline and delay in implementing ADB-funded projects," finance secretary Shanta Raj Subedi said at the Nepal Country Portfolio Review Meeting (CPRM) organised here by the ADB today.
The government is taking the issue seriously, he said, adding that the ministry has started serious consultation with key officials in concerned ministries to address the delay.
The overall performance rating of Nepal's portfolio in the fiscal year 2012-13 stood at three out of five, said ADB's country director to Nepal Kenichi Yokoyama, on the occasion. The performance review was conducted between January 2012 and this August.
The country stands to get an assistance of only $405.4 million in 2015-16, as against $498.9 million, if the rating goes up to 4.5.
Nepal's allocation from the ADB could be increased by $45 million a year, from the current level of $227 million, if the country can achieve a rating of 4.5, he added.
Last year, ADB provided around $400 million financial aid – including $45 million grant assistance – to Nepal.
Apart from start-up delays, low performance of consultants and contractors, frequent transfer of key project staff, delay in decision making, weak capacity of the Public Procurement Monitoring Office and procurement entities, malpractice during bidding process and low accountability at implementation level due to fluid political environment and absence of local bodies at the central and district level, progress in ADB-funded projects slowed down last year mainly due to two major projects – the $35-million school sector programme and $30-million tunnel construction of the Melamchi Drinking Water Project, the prestige project of the Manila-based multilateral donor.
ADB had to cancel the 27-km tunnel project of Melamchi Drinking Water Project being implemented by a Chinese contractor after the company failed to make adequate progress meant for supplying clean drinking water to Kathmandu Valley.
"We still need to face enormous challenges in terms of improving portfolio performance,” Yokoyama said, adding that it may be further complicated by  the remaining challenges to complete political transition process.
Despite many hurdles, the ADB country director for Nepal said that timely endorsement of the budget and extension of authority to utilise funds allocated for them are some of the positive developments.
“With the new progresses, we hope that the contract award in 2013 can reach close to $300 million,” Yokoyama added. “The five-year Country Partnership Strategy of ADB for Nepal would emphasise on improved portfolio performance and associated institutional development.”
The ADB resident director for Nepal also stressed on the need for effective monitoring and troubleshooting and undergoing reform on budget planning, approval and release, public procurement public financial management and other accountability mechanism.
Since the ADB started supporting Nepal in 1969, the aid agency has extended cumulative assistance of $3.61 billion till the end of 2012. As of August, ADB’s active portfolio amounted to around $1.5 billion with 35 investment projects. But only $605.8 million worth of contracts were awarded or were in the final stages of being awarded in the last fiscal, and only $359.8 million was disbursed.
The contract award and fund disbursement should stand at 70 per cent and 40 per cent, respectively, according to the ADB’s standard but Nepal’s ability to contract or commit only 40 per cent of projects and disburse only 23 per cent of the amount last fiscal year has raised serious questions about proper execution of development projects.
According to portfolio performance review report, Nepal takes a long time to award contracts and disburse funds. Projects on average took 2.5 years to achieve 25 per cent of contract award target and 2.3 years to disburse 10 per cent of loans and grants as of August, the review stated, adding that the delay resulted in underutilisation of the grants and loans.

Four projects receive award
KATHMANDU: The Asian Development Bank (ADB) awarded four projects – Rural Reconstruction and Rehabilitation Sector Project, the Community Managed Irrigated Agriculture Sector Project, the Second Small Towns Water Supply and Sanitation Sector Project, and the Air Transport Capacity Enhancement Project – on Thursday. The ADB-supported projects helped improve water supply and sanitation services, air safety standards and lives of the rural poor and farmers in the country.

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