--By Gaurav Aryal

 

The World Bank Group (WBG), one of the largest multilateral development partners of Nepal, has promised long-term support for the country. Its Country Partnership Strategy (CPS) for four fiscal years 2014-18, launched on June 20, has promised USD 222 million for 2014 and USD 200 to 300 million for each of the remaining three years. WBG introduced this shift after three consecutive interim strategies for fiscal years 2007, 2009 and 2011, which primarily focused on post-conflict support.

 

Similarly, International Finance Corporation (IFC), WBG’s private sector lending arm, is expected to double its support by next year. Its Resident Representative Val S. Bagatsing, while stating that the actual amount remained sketchy, said that the organization would provide USD 300-800 million for hydropower and USD 20-40 million for financial institutions, manufacturing, agribusiness and services. 

 

IFC has been specially focusing on promoting Nepali private sector’s initiatives in hydropower, aviation and trade finance, financial institutions, manufacturing sector, agro businesses and in the service sector since 2008.

 

Primary Concerns

“CPS supports Nepal’s aspirations for increasing economic growth through increased investments in key sectors while providing support to make the growth more inclusive by helping in the equal distribution of opportunities across groups and communities,” Johannes Zutt, World Bank’s (WB) country director for Nepal, said at the launch program while elaborating on the core objectives of the CPS.

 

The CPS is aligned to the World Bank’s twin global goals—eliminating extreme poverty and boosting shared prosperity. Two pillars of CPS are increasing economic growth and competitiveness and increasing inclusive growth and opportunities for shared prosperity. 

 

Under the first pillar, WBG aims to concentrate on increasing electricity supply—including import and improved access to reliable and affordable electricity within Nepal—, improving transportation connectivity and enhancing environment for private sector investment— including increased financial sector stability.

 

 Similarly, the second pillar is aimed at boosting agricultural productivity and commercialization, increasing access to education and skills development, improving health and nutrition services and making more efficient and transparent social safety net system.

 

Speaking on the occasion, Sharmila Karki, chairperson of NGO Federation of Nepal, said that infrastructure development and inclusive growth would help Nepal achieve some of the most important development goals. She said that the civil society is committed to assist WB in implementing the second pillar.

 

Long-term Support

WBG’s promise to support Nepal’s economic growth aspirations through increased investments in key sectors and by supporting the process to make growth more inclusive is reflected in its shift towards long term assistance. Finance Minister Dr Ram Sharan Mahat lauded this shift and claimed that release of the full-scale CPS rather than an ad-hoc paper indicates days of stability are nearing with the end of post-conflict period.

 

He further praised the CPS as an excellent document for revision of the past performance and identification of constraints faced by the Nepali economy.

 

Alignment with National Priorities

“The new 2014-2016 plan is currently being prepared and will build on the previous one (2009-2013). The overarching goal is to improve the living standards of all Nepalis and to attain the status of middle-income country by 2022,” the WBG said in a statement while affirming that its strategy aligns and supports government’s development plans.

 

While time and often strategies of donor agencies are criticised for imposing their agenda rather than incorporating the priorities of the target countries, the CPS is being praised for being aligned with the national priorities. Madhu Marasini, Chief of International Economic Cooperation Coordination Division (IECCD) at the Ministry of Finance said that the CPS is quite aligned with the government priorities. He urged development partners, “Provide us with the fund to meet the interests of the government and the country.”

 

He called on development partners to focus on areas prioritised by the government based on their comparative advantages rather than scattering funds in various projects in multiple sectors.

 

WBG says that its support will be guided by the principles of balancing risks and rewards, selectivity and flexibility. It has made a shift from more cautious approaches taken in the past and now plans to engage in larger programs that strive for making nation-wide impact. It claimed that the CPS consolidates the group’s engagement into fewer sectors, where it has a comparative advantage and can leverage its financing and analytical resources for greater development impact.

 

Risk Management Strategies

WBG points out political instability that can impact economic performance, weak governance and increased corruption and fiduciary risks, low capacity for program implementation and for assessing and mitigating environment and social impacts, as major risk in actualizing the CPS objectives. It claimed that specific mitigation measures have been devised to prevent these risks from impacting CPS implementation and to mitigate them as they occur. 

 

These measures include a more active cross-party engagement and communication to build all-party consensus on development needs; addressing both ex ante and ex post dimensions of public resource use through public financial management activities; increased focus on safeguards during preparation and implementation support through capacity building, training and study tour programs for key officials involved in the safeguard workand taking a more holistic approach, particularly in hydropower, that focuses on availing necessary governance, policy and institutional frameworks and strengthening the synergies between International Development Association (IDA), IFC and Multilateral Investment Guarantee Agency (MIGA).