Finance minister rues under-utilised foreign assistance

- POST REPORT, Kathmandu
Finance minister rues under-utilised foreign assistance

Sep 5, 2014-

Finance Minister Ram Sharan Mahat on Friday rued under-utilisation of foreign aid, with the ministry reporting only 49 percent of grants and 24 percent of loans having been spent in fiscal 2013-14.

The government had aimed to spend Rs 69.54 billion in grants and Rs 43.7 billion in loans that year. In the previous fiscal 2012-13, utilisation of grants and loans reached 74 percent and 36 percent respectively.  Speaking at the current fiscal year’s first local donors’ meeting at the Finance Ministry on Friday, Mahat said that the delivery of foreign aided projects was very bad in the last fiscal year. “We have to sit down together to improve the situation,” he added. Nepal’s deteriorating capacity to utilize foreign aid is reflected in the performance pattern of the past six years until fiscal 2012-13. Utilization averaged 66.91 percent for grants and 49.18 percent for loans, according to the Mid-Term Review document of the last fiscal year’s budget.

Mahat said that the delivery of internally funded projects was much higher than that of projects financed by external resources. He also highlighted the recent trend of increased dependence on domestic resources to carry out development activities.

On the occasion, donors praised the overall orientation of the current budget but stressed the need to increase spending of the capital budget. “We would like to see the Finance Ministry’s plan to have capital expenditure of 8-12 percent of the gross domestic product to meet Nepal’s infrastructure gap,” said a representative of donors.  

A recent World Bank report states that Nepal needs  $ 13-18 billion to bridge the investment gap in infrastructure between 2011-20, however, the biggest gap remains in the energy sector.

Donors also showed concern over the utilisation of resources that would be spent under the constituency development fund. The government through the current fiscal year’s budget has announced providing Rs 10 million for each constituency. The money will be spent as lawmakers see fit. Donors said that there was a need for a strong regulatory mechanism for effectively utilizing these resources.

With the government focusing on infrastructure, Nepal’s benefactors also raised concern over the reduced percentage of the budget for the education sector in the current fiscal year. “This may have an impact on education,” said the representative speaking on behalf of donors.

Finance Minister Mahat said that despite the relative decline in the budget, huge resources were being spent on education through local-level mechanisms. He added that a decrease in foreign aid for the education sector was one of the reasons why the budget allocation for the sector came down this fiscal year.

Published: 06-09-2014 09:22

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