Foreign aid policy passed

- POST REPORT, Kathmandu
Foreign aid policy passed

Jun 26, 2014-

The government has endorsed the new foreign aid policy, in which it has for the first time fixed the minimum amount of foreign aid. The policy has set the minimum limit on grants and soft and commercial loans.

With the new policy in place, the government will not accept grants below $5 million, concessional loans less than $10 million and commercial loans below $20 million per programme/project.

Finance Minister Ram Sharan Mahat said the new foreign aid policy has been introduced in line with the government’s plan for “second generation” reforms. “The new aid policy has been endorsed in accordance with the second generation reform,” said Mahat at a round table on the upcoming budget organised by Kantipur Media Group in Kathmandu on Thursday.

The government has set the lower limit in a bid to discourage aid fragmentation so that the desired impact can be achieved. “The basic thrust of setting the ceiling is to improve the quality of foreign aid,” said a senior Finance Ministry official. “With new policy, we have tried to be selective and focused when it comes to accepting foreign assistance.”

According to the Finance Ministry, the new policy has explicitly defined priorities while accepting grant and soft and commercial loans.

According to the Development Coope-ration Report (DCR) 2012-13, a single donor has been found engaged in as many as 138 projects involving 25 ministries and agencies. According to the Finance Ministry, over 50 percent projects among the 293 projects in the current budget are worth below $2 million.

The new policy has also tried to address “off budget” tendency. The DCR 2012-13 had revealed that as much as 36 percent of the total donors’ fund was disbursed in the last fiscal year, bypassing the country’s budgetary system. Of the total $960 million foreign assistance extended to Nepal, $345 million was disbursed outside the budgetary system. “The policy calls for foreign assistance in line with the country system,” said the official.

Amid donors’ reservations over the policy, the government has toned down the language in the final version, according to Finance Ministry sources. The donors had expressed concerns not only over the provision of setting the minimum limit, but also over “restrictions” on their collaboration with international and national non-government organisations and the use of technical assistance. “We have tried to address donors’ concerns,” said the official.

Published: 27-06-2014 09:10

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