ADB ‘unlikely’ to resume grants anytime soon

- POST REPORT, Kathmandu
ADB ‘unlikely’ to resume grants anytime soon

Aug 15, 2014-

Asian Development Bank (ADB) has hinted it is unlikely to resume grants to Nepal anytime soon despite the government’s continued requests for the same.

ADB Vice-President Wencai Zhang said at a press meet here on Friday Nepal does not need grants, given the country’s enhanced capacity to repay debts.

“Nepal is in low-risk category in terms debt sustainability,” he said.

The lender, before discontinuing the grants in 2013, had been providing grants and loan at 50:50 ratio. It used to provide $100 million in grant to the country annually under its Asian Development Fund.

Zhang, however, insisted on better mobilisation of loans to have desired impact on the economy amid the government’s poor performance in spending.

Although Nepal’s debt against the gross domestic product has come down to 30.1 percent in the last fiscal year, against 16 percent a decade ago, the government has been saying the country is being penalised for repaying loans in time due to its failure to spend allocated budget.

During a meeting with Zhang on Thursday, Finance Minister Ram Sharan Mahat had urged him to resume grants to Nepal, given the country has just come out of an insurgency.

Although the government has been giving renewed focus on infrastructure, it wants grants to invest in the social sectors. Mahat had also urged the top ADB brass for continuation of grant during his tour to Kazakhstan in May to take part in the multilateral donor’s 47th annual meeting. ADB, however, plans to study Nepal’s “tax sustainability framework” before any discussion on resuming grant to Nepal.

Zhang also said ADB would provide concessional loans of about $1.5 billion within the next five years to invest in economic sector reforms and investments in critical infrastructure such as energy, transport, urban services and irrigation as well as in human development and agriculture development.

“In this context, it is very important that the overall project implementation performance is substantially enhanced to achieve the intended development impact and qualify for increased ADB assistance,” he said.

Zhang said ADB was keen on supporting in developing regional road connectivity and cross-border transmission lines. Besides, ADB has also planned to issue Nepali rupee bonds.

“The bonds that will have maturity period of 7-10 years are expected to encourage the private sectors to come up with more investments for the development project,” said ADB’s Country Director Kenichi Yokoyama.

The Asian lender has already proposed issuing local currency bonds worth Rs 50 billion to the government.

Published: 16-08-2014 09:50

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