The government has planned to mobilise foreign assistance either through budgetary control system or by setting up a separate basket fund in order to ensure effective utilisation of the foreign aid and grants, government officials told the parliamentary Finance Committee meeting on Sunday.

Currently, donors are allowed to mobilise funds via NGOs and I/NGOs after signing an agreement with the government agencies. If the foreign assistance is brought under the budgetary system, the government would have a management control on it so that the income and spending would be more transparent and the fund would be utilised in a more productive way, they said. It was discovered that many foreign donors typically pledge to provide a large amount of funds initially but later don’t fulfill their commitments. “In many cases, foreign donors impose a number of conditions when they provide money as per their commitment,” said the officials. They [donors] were even found approving money to projects that haven’t made proper preparation in advance.

“As a result, the fund received via foreign aid yields poor performance against the target,” said Finance Secretary Rajan Khanal, speaking at the meeting. As per the Finance Ministry record, the country has been able to utilise only half of the committed amount in foreign assistance in the last four years. Apart from underperforming, a large chunk of foreign grants and loans that Nepal have been receiving are invested in areas where there are already projects and programmes set up, he said, causing duplicate projects.

“So it’s time to revise the policy on foreign aid disbursement.” In addition, the Finance Ministry has also planned to adopt one-window system or set up a single basket fund to address the existing trend of foreign assistance being underutilised,” Khanal said.

The development partners have committed to increase foreign aid for smooth operation of the country’s federal system. During Finance Minister Yubaraj Khatiwada’s recent visit to the World Bank Group headquarters in Washington DC, US, the multilateral lending institution pledged to double its support to Nepal from 2019.

At present, the World Bank’s annual lending portfolio for Nepal stands at around $200-300 million. The ministry has targeted to increase the revenue collection for this fiscal year by 35 percent.  “As the government does not have the reserve fund of the past year, we have to rely on foreign aid to run development projects, in which the donors are also keen to support,” said Khanal. The government through the Finance Ministry has aimed to coordinate with development partners for receiving foreign aid with less stringent conditions, he said.