Aid flow shrinks due to reimbursement delays

- POST REPORT, Kathmandu

Nov 26, 2014-

The government’s failure to seek reimbursement of foreign aid expenditure has led to a sharp drop in aid flow as of November 23, said the Finance Ministry.

Nepal received a total of Rs 5.16 billion in foreign grants against Rs 13.37 billion during the same period in the last fiscal year. Likewise, the country obtained Rs 2.24 billion in loans compared to Rs 8.82 billion in the previous year. Spokesperson of the Finance Ministry Krishna Prasad Devkota said that the inflow of foreign aid went down drastically as government officials were still not active enough to seek reimbursement from the donors.  

Although the Finance Ministry has been consistently pressing the line ministries for an early recovery of the pledged donor funding, there has been little progress on this front.

Government agencies are required to submit the details of the expenditure made on foreign aid projects to the donors to get reimbursement of the money that has been spent. Donor-funded projects have been having difficulties spending their money unlike projects financed by domestic resources.

The Finance Ministry said the government was able to make use of only 49 percent of the grants and 24 percent of the loans it received in the last fiscal year 2013-14. The government had aimed to spend Rs 69.54 billion in grants and Rs 43.7 billion in loans that year.

With the inflow of foreign loans and grants shrinking, the country’s balance of payments (BoP) has also been hit. The BoP is the difference between the amount of money that goes out of the country and the amount that comes into the country.  

During the first quarter of the current fiscal year, the BoP recorded a surplus of Rs 2.96 billion against a surplus of Rs 52.74 billion during the same period in the previous year.

Foreign grants and loans are also an important part of the BoP although remittance, which is also on a declining trend lately, contributes greatly to maintain the BoP situation.

Meanwhile, the government’s capital expenditure as of November 23 reached Rs 5.09 billion against Rs 4.09 billion during the same period in the last fiscal. There has also been a rise in the expenditure under the recurrent and financing headings.

“Capital expenditure is still poorer than desired although the first four months are usually spent in tender processing for new projects,” said Devkota. The government’s failure to spend the budget has resulted in the treasury holding as much as Rs 69.35 billion, said the ministry.

Published: 27-11-2014 09:54

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