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DOCKING NEPAL’S ECONOMIC ANALYSIS
FOREIGN AID AGRICULTURE FOREIGN AID
The review period highlights that efficiency of mobilization and management of development aid as well as foreign investment in productive sectors are some of the most important financing strategies needed for Nepal. The country has received increasing amounts of loans and grants but has lagged behind in its efficient mobilization because of lack of capacity on the end of the government, which is why robust growth has not yet been possible. Ministry of Finance and Asian Development Bank sign agreement for grid modernization: The Ministry
of Finance (MoF) Nepal and the Asian Development Bank (ADB) have signed a loan agreement for the modernization of electric grids in the country. The total investment cost of the project is estimated at NPR 22.81 billion (USD 0.19 billion) and out of this amount, ADB will bear NPR 18.25 billion (USD 0.15 billion) while the remaining NPR 4.56 billion (USD 0.037 billion) will be invested by the Nepal Electricity Authority (NEA). The primary objective behind signing this agreement is to improve the power transmission and distribution capacity of the country under the Electric Grid Modernization Project. The Joint Secretary of MoF Nepal believes that this agreement can also help make the power supply sustainable and reliable, and develop and strengthen the capacity of Nepal. Furthermore, the electricity saved from the project can also be exported to other neighboring countries, which can make a positive contribution to the economic activities of the country.65 Foreign assistance received in the first four months of the current fiscal year: Nepal has received a
commitment of foreign assistance worth NPR 90.54 billion (USD
769.02 million) in the first four months of the current fiscal year. Out of this amount, 85.8% is loan assistance. With this the MoF has reported that the share of foreign assistance has increased six-folds as it was NPR 15.67 billion (USD 133.09 million) during mid-July and midNovember in the last fiscal year.66 Government of Nepal and ADB sign concessional loan: The Nepal
government and ADB have signed a joint concessional loan agreement of NPR 17.66 billion (USD 150 million) to finance the ‘South Asia Sub-regional Cooperation (SASEC) Airport Capacity Enhancement Project’. This project is aimed to enhance the airport capacity by constructing parallel taxiway extension, hanger apron, next phase of design work of Tribhuvan International Airport as well as the construction of second terminal at Gautam Buddha Airport. They have also signed an additional NPR 4.70 billion (USD 40 million) concessional loan and NPR 1.17 billion (USD 10 million) grant for the implementation of Priority River Basins Flood Risk Management Project. The project will contribute to improve flood protection infrastructure, enhanced flood forecasting and response system, improve flood prevention and
preparedness capacity.67 Government of Nepal and World Bank sign a rural enterprise development project: The Nepal
government and the World Bank have jointly signed a project worth NPR 9.41 billion (USD 80 million) titled ‘Rural Enterprise and Economic Development Project’ (REED). The project aims to boost Nepali agricultural sector by strengthening rural market linkages and promoting entrepreneurship while creating jobs to support post Covid-19 recovery. Through this project, the partnership between local and provincial governments, as well as rural producer organizations and private-sector buyers will be facilitated which can add value, create jobs and foster sustainable inclusion. The project also aims to use labor-intensive ‘Cash for Work’ mechanism, to the extent possible, in short-term public works.68 Asian Development Bank launched COVID-19 vaccine initiative: The
ADB has launched a NPR 1.05 billion (USD 9 billion) vaccine initiative for its members in order to provide rapid and equitable support to its members, including Nepal. It is expected that through this initiative, the government of Nepal will be able to launch and deliver effective as well as safe COVID-19 vaccines.69
