March 1: The government has set a target of receiving foreign assistance worth Rs 300 billion in the current fiscal year. However, more than half the year has been spent but the foreign assistance received so far is much less than expected.

According to the Ministry of Finance, until the half-yearly review of the budget a total of Rs 34.57 billion has been received as foreign assistance. The government takes grants and loans from donor agencies. Till the mid-term review of the budget, the government received Rs 8.11 billion as grants. Similarly, it received of Rs 26.45 billion towards loan.

There has been a slight increase in aid commitments though. Various donors have pledged Rs 23.12 billion in grants and Rs 114 billion in subsidized loans.

However, it seems that the government has not received financial assistance as promised. During the same period of the previous fiscal year, the government had received commitment for financial assistance worth Rs 110 billion for various development projects.

However, last year too, it did not receive financial assistance as per the commitment.

The government is still facing problems in the mobilization of foreign aid. According to the Ministry of Finance, due to poor project management and dilly-dallying of construction entrepreneurs, the implementation of projects run on foreign aid has slowed down and the capital expenditure has been reduced, which has affected direct payments and refunds made by development partners. Due to this, the mobilization of foreign aid did not increase significantly during the review period.

Officials claim that there has been a significant progress in the implementation of the government's policy of mobilizing development aid through the national budget system. However, the Finance Ministry has not yet been able to include all types of development aid in the budget system.

The donors are mobilizing part of the grant aid received by Nepal outside the national budget system through international organizations and non-governmental organizations based on their own risk analysis results.

The half-yearly review of the budget has admitted that the Ministry of Finance has failed to focus on technical assistance to complete the preparatory activities of the projects and to enhance the institutional capacity of the implementing agency and fill the lack of expertise required for the projects.

According to Anand Kafle, joint secretary of the Ministry of Finance, the fragmentation of development aid is still in place despite the policy arrangement and continuous efforts. Due to this, the number of small projects is high and it takes more time and cost to implement them, and to monitor and report those projects. The institutional capacity to mobilize aid through provincial and local levels is weak, while the necessary coordination has not been established at those levels as per the provisions in the guidelines on foreign aid mobilization. In the half-yearly review report, the Ministry of Finance has stated that there has been a difficulty in resource management because of lack of cooperation from the agencies concerned for the timely action to complete the preparatory works, including the policy reforms required to receive the budgetary aid programs.

Homework for extra help

The Ministry of Finance has intensified discussions with development partners to mobilize development assistance in the current fiscal year and upcoming years. The Finance Ministry is negotiating with the Asian Development Bank to receive USD 300 million (about Rs 39 billion) for the implementation of the Kakdavitta-Laukhi road section and USD 100 million (about Rs 13 billion) from the World Bank for the school sector transformation project.

Similarly, a project document has been prepared to obtain concessional loan of US$ 100 million (about Rs 13 billion) from the World Bank for the Quality Health System Project.

Similarly, for the implementation of the Dudhkoshi Reservoir Hydroelectric Project (635 MW), the Asian Development Bank has received a letter of intent to provide a concessional loan of US$ 580 million (about Rs 75.4 billion). The Ministry of Finance said that they are coordinating with other donors to collect financial resources.

Similarly, a draft memorandum of understanding is being discussed to receive 90 million sterling pounds (about Rs 14.4 billion) as a grant from the British government for the implementation of the local infrastructure support program.