Nepal pleads with Asian Dev Bank to resume grants

Nepal pleads with Asian Dev Bank to resume grants

May 23, 2014-

The government has requested the Asian Development Bank (ADB) to resume providing grants to Nepal as it is still in transition and though its repayment capacity may have improved, economic growth and per capita income are still poor.

The Asian multilateral lender stopped providing grants to Nepal from last year citing its enlarged debt servicing capacity. Currently, the ADB has been providing only soft loans to Nepal.

The country’s outstanding foreign debts shrank to 17.6 percent in fiscal 2012-13 from a high of 45.4 percent in fiscal 2002-03, according to the Economic Survey 2012-13.

Government and ADB officials have confirmed that Finance Minister Ram Sharan Mahat made this plea to ADB President Takehiko Nakao during the bank’s recent annual meeting in Kazakhstan.

Chief of the International Cooperation Coordination Division at the Finance Ministry Madhu Marasini said that Nepal appealed for a resumption of grants as it still needed lots of resources for social sectors like education, health and drinking water for which it could not afford to take foreign loans.

“In fact, Nepal has repaid foreign loans at the cost of development with funds that remained due to poor spending,” said Marasini. “This should not be seen as a great improvement in the country’s repayment capacity.”

Over the last six years, Nepal’s economic growth rate has remained below 5 percent, and it is expected to swell 5.15 percent this fiscal. The country’s per capital income is expected to reach $ 715 this fiscal year, according to the latest Annual National Account Estimate 2014 of the Central Bureau of Statistics.

As far as utilization of foreign aid is concerned, Nepal was able to spend only 66.91 percent and 49.18 percent of grants and loans respectively during the same period. During this fiscal year, the Finance Ministry has projected that expenditure of grants and loans will amount to 77.14 percent and 49.18 percent respectively, according to a mid-term review of the budget.

Meanwhile, the ADB’s Country Director for Nepal Kenichi Yokoyama said that the country office had not received any indication from ADB headquarters about a change in its loan-only policy.

Yokoyama added that Nepal should consider taking commercial loans to meet its resource gap as its external loan size was small compared to its gross domestic product (GDP).

Interest rates on commercial loans are higher than for soft loans. Nepal has not accepted commercial loans from any donor. The interest rate on loans received from exim banks has been a little higher than for soft loans.

The government has inserted a provision okaying commercial loans for big infrastructure projects in the proposed Development Cooperation Policy. Yokoyama said that the ADB could provide a maximum of $ 250-300 million in soft loans to Nepal. “It will be a wise decision to accept commercial loans to meet Nepal’s resource gap,” he added.



Published: 26-05-2014 13:40

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