February 21: Foreign grants provided by the donor agencies have been declining due to the decline in the capacity of the Government of Nepal to mobilize the foreign aid.

According to the latest Development Cooperation Report published by the Ministry of Finance, the government of Nepal received USD 1.44 billion from donors as foreign aid in the FY 2021/22, which is the lowest since FY 2017/18.

In the year FY 2020/21, the government received foreign aid worth USD 1.7 billion – a decline of 15.88 percent compared to the preceding FY when the foreign aid received by Nepal had reached an all-time high of USD 2 billion.

According to government officials, the main reason for the decrease in foreign aid is poor government spending and delays in reimbursement from donors.

Officials of the Ministry of Finance say that when capital expenditure is weak, the utilization of foreign loans will be low and this will affect the overall foreign aid received by the country. According to them, almost all foreign loans are used either for capital expenditure or for investing in certain projects of public institutions. However, these expenses have been slow for a long time.

According to former secretary Gopi Krishna Mainali, various conditions have to be fulfilled to reimbursement from donor agencies and if the government fails to comply with the conditions the donors do not release the full amount.

Foreign aid has been the main source for Nepal's development budget. However, due to the decrease in receiving such aid, the share of development aid in Nepal's budget decreased to 22.6 percent in FY 2021/22. It was 24.4 percent in FY 2020/21.

According to the report of the Ministry of Finance, there is a possibility that the foreign aid Nepal will receive will further decline in the next three years. The report points out that such a situation may arise due to changing geopolitical priorities and internal financial problems of development partners.

Among the development partners, Nepal received the maximum financial assistance from the World Bank in FY 2021/22. Of the total assistance of USD 484.9 million through the World Bank, USD 474.4 million was loan. The total disbursement by the Asian Development Bank was of USD 290 million including USD 265 million in loans. The International Monetary Fund provided USD 110 million as budgetary support for debt repayment.

Although the American aid organization USAID signed a maximum aid agreement worth USD 659 million in the review year, the actual payment was only USD 101.3 million. A major part of USAID's such payments was in the form of technical assistance worth USD 88.4 million.

In the review year, 99.5 percent of the total loans received by Nepal were mainly from five development partners - World Bank, Asian Development Bank, International Monetary Fund, India and Japan.

Likewise, 57.5 percent of the total grants was received from the United Nations, the United Kingdom, Norway, the European Union and the Global Alliance for Vaccines and Immunization (GAVI).