Foreign aid commitment exceeds budget estimates

Kathmandu, July 17: Nepal has received foreign aid commitment of Rs. 273.04 billion in the Fiscal Year 2024/25 which is above the annual estimates announced by the budget of the same year. 

Statistics from the Ministry of Finance (MoF) showed that the country received the commitments of Rs. 215.54 billion for loan and Rs. 57.50 billion for grants. In the budget of 2024/25, the government had anticipated to secure Rs. 270 billion in foreign aid – Rs. 217.67 billion in foreign loans and Rs. 52.33 billion in foreign grants. 

The commitments Nepal received were in infrastructure, transport, environment and climate, governance, disaster management, agriculture and irrigation, water and education. Among these, transport sector received the commitment of Rs. 63.94 billion in projects like provincial and local roads improvement, bridge improvement and maintenance, and strategic road connectivity and trade improvement. 

Energy sector witnessed a commitment of Rs. 56.41 billion in the projects like power distribution consolidation, and SASEC Electricity Transmission and Distribution. Most of the aid is to be mobilised in the SASEC project. 

Likewise, aid commitment in environment, forest and climate change sector stood at Rs. 55.87 billion where priority projects are Green, Resilient and Inclusive Development (GRID), climate resilient landscapes and livelihood, managing watersheds, and forests and prosperity. 

Other major sectors receiving the foreign aid in loans and grants are irrigation Rs. 28.47 billion, water Rs. 25.53 billion, disaster management Rs. 20.13 billion, social Rs. 9.6 billion and agriculture Rs. 9.4 billion. Smaller cooperation commitments were made in governance, and education as well. 

Nepal's development partners (DPs) in the year are the World Bank, Asian Development Bank, Foreign, Commonwealth and Development Office (FCDO) of the UK, Germany, the European Union, China, Norway, International Fund for Agricultural Development, Switzerland, World Vision International, Japan and Strategic Climate Fund.  

With commitments of above Rs. 118 billion, ADB has emerged as the largest development partner for Nepal. 

It is supporting irrigation, climate resilient livelihood, water supply, SASEC electricity transmission and distribution, GRID and floods and landslide emergency response. 

Similarly, with about Rs. 100 billion (including Rs. 1.6 billion in grants) aid commitment, the World Bank remains the second largest DP for Nepal. It is supporting road improvements, disaster resilience, GRID, bridge improvement and trade improvement. Although complete data for the FY 2023/24 is not available, the country received foreign aid commitments of Rs. 120.59 billion by May 22, 2024 – about seven weeks remaining for the FY to conclude. Commitments included Rs. 74.24 billion in loans and Rs. 46.34 billion in grants. 

That year, major sectors receiving foreign aid were health, road, urban development, education, public finance management, industry and climate, governance, social, agriculture, waste management and tourism. The ADB was the largest donor in 2023/24 as well followed by the WB, EU, UK, Germany, Japan, Switzerland and Finland.