ADB: Nepal could lose funding if no improvement

- POST REPORT, Kathmandu
ADB: Nepal could lose funding if no improvement

Jul 27, 2015-

Asian Development Bank (ADB) Director General Hun Kim on Monday warned that Nepal could lose potential resources from the ADB if the performance of the projects financed by it did not improve.

As per the ADB report, Nepal had not contracted a large portion of the portfolio equivalent to $1.09 billion while as much as $1.42 billion was still left to be disbursed as of June-end this year. The figures represent 56 percent and 73 percent of the ADB’s total portfolio of $1.95 billion respectively.  

“ADB resources are allocated competitively based on the country’s portfolio performance,” said Kim while speaking at the Tripartite Portfolio Review Meeting organised in the Capital. “Nepal needs this resource most for its development endeavour. So, it is very important for us to improve the performance.”

Nepal’s poor portfolio performance has been attributed to a lengthy procurement process, weak project management capacity and weak performance of consultants and contractors. “All these have led to slow project implementation with low disbursement resulting in multiple loans and grant extensions,” said Kim, adding that Nepal’s portfolio had room for improvement.

As per the ADB report, the organisation has approved contract awards of $242.8 million and disbursement projections of $210.6 million for ADB-assisted programmes for 2015. However, by the end of June, contract awards had reached just $55.5 million (23 percent against the annual target) and disbursements amounted to $46.1 million (22 percent against the annual target). “It clearly shows our poor absorption capacity.”

Following the April 25 earthquake, the ADB has approved an Earthquake Emergency Assistance Project of $200 million to help the country in reconstruction. In addition, the international organisation is also providing $30 million under its budget support and $15 million under the Japan Fund for Poverty Reduction. The ADB says it is ready to provide further assistance depending on the country’s demonstrating an improved absorption capacity. “A strong government leadership is needed to improve the country’s absorption capacity to address the enormous challenges for timely implementation of the Emergency Project which has to be completed by March-end 2019.”

The Asian lender’s director general also urged the earliest possible establishment of the National Reconstruction Authority and stressed the need for a clear working mechanism at the central level along with dedicated project implementation units at the project level for effective implementation of Earthq-uake Emergency Assistance Project.

He expressed concern at delays in the implementation of large ADB-funded infrastructure projects including Melamchi Water Supply, upgrading of Tribhuvan Internati-onal Airport, SASEC Roads Connectivity and transmission lines.

The ADB director general has asked for an in-depth diagnosis of the problems, effective monitoring and review mechanism, strict application of the conditions of the contracts and close monitoring of the performance and deliveries of contractors and consultants to improve the performance of these projects. “Non-performing contractors and consultants should be terminated without delay.”

The ADB also expressed concern at the frequent transfer of key project staff and assignment of weak accountants to ADB-funded projects.   

Meanwhile, the Ministry of Finance blamed the country’s poor portfolio performance on the tremors that hit the country besides project implementation related problems.

“Amid the poor performance of ADB-funded projects, more efforts must be made by the project teams and the line ministries so that procurement processes are expedited and claims for disbursement are executed timely,” said Finance Secretary Suman Prasad Sharma.

The government’s capital expenditure amounted to 74.2 percent of the total allocation in the fiscal year 2014-15, reflecting persistent weaknesses in the budget execution processes, lack of project readiness and procurement-related delays in budget execution processes. As the latest budget statement has declared the new fiscal year as Budget Implementation Year, Sharma said the government should now demonstrate its capacity.

Published: 28-07-2015 09:09

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