74pc of grants, 36pc of loans spent in last fiscal year

KATHMANDU, APR 24 -

Nepal spent only 74 percent of the grant s and 36 percent of the loans in the last fiscal year 2012-13 prompting calls by the government and its benefactors to increase the disbursement of foreign aid. 

Utilization of aid has remained poor over the last several years due to the country’s inability to absorb it, said the Finance Ministry.  

“Low disbursement of foreign aid is a key problem facing the country,” said Finance Minister Ram Sharan Mahat, speaking at the Nepal Portfolio Performance Review (NPPR) meet on Wednesday. 

“Aid money is primarily being channellised into capital expenditure, therefore, the low disbursement rate of foreign aid adversely affects Nepal’s highest priority economic goals.” He stressed the need to identify the reasons behind the slow disbursement.

Similarly, donors have called for steps to expand the country’s absorptive capacity. Speaking on behalf of the donor community, Country Director of the Asian Development Bank (ADB) Kenichi Yokoyama stressed 

urgent action to enhance the absorption level to tackle the problem of low 

disbursement. 

“Despite enhanced commitment from donors to increase aid, disbursement has been stagnant since fiscal year 2011-12 to fiscal year 2012-13,” he said. “Non-disbursement of aid from the World Bank and ADB has been increasing.”

These two multilateral donor agencies are the two largest contributors to Nepal. In the last fiscal year, aid disbursement from both the donors decreased, which was one the reasons why much aid entered the country bypassing the government’s budgetary system, according to Development Cooperation Report released by the Finance  Ministry.

The World Bank and the ADB have one of lowest funding in Nepal through mechanisms outside the country’s budgetary system. Me
anwhile, government officials and donors have pointed to a number of problems that are holding back the disbursement of foreign aid.

According to Yokoyama, delays in budget execution, high staff turnover,  procurement problems, weak field-level accounting and poor internal control, land acquisition related problems and weak performance of contractors are common problems in donor-funded projects. Donors pointed out that most of the projects bankrolled by them had been affected due to delayed execution of the budget. They said that performance could be better if the budget were to be presented before the start of the next fiscal year.  

Enforcement of the Pubic Procurement Act and Public Procurement Regulation has been weak due to limited capacity of procurement entities and the Public Procurement Monitoring Office, said donors. 

“Lack of expertise in procurement and timely procurement planning, collusion, intimidation and insecurity and uneven ex-post physical verification are other concerns,” they said.

Yokoyama said that land acquisition problems had remained serious in transmission projects and in some road projects. “A high proportion of infrastructure projects have encountered weak performance of contractors delaying the projects,” he said. 

While donors pointed out many flaws of the government, government officials said that the aid givers should share some of the blame. 

A high staff turnover at development projects has been a consistent complaint of donors. Chief Secretary Lilamani Poudel said that nobody had presented an analysis of how much it cost the government in resources and time due to frequent staff turnover.

He added that aid fragmentation and the tendency to hire foreign consultants even at community-based programmes had affected aid effectiveness. He stressed the need to strengthen the capacity of the government mechanism instead of delivering aid outside the budgetary system.

Joint Secretary at the Finance Ministry Baikuntha Aryal said that the disbursement of foreign aid had been affected due to the need to get an okay from the donors at every step. “Sometimes, contradictions in the procurement guidelines of the government and the donors have also hindered project implementation,” he added.

Donors expressed readiness to share the blame for the poor implementation of projects funded by them. World Bank Country Director for Nepal Johannes Zutt said that he would like to take ownership of the problems mentioned by the government officials.

On concerns raised by government officials on different procurement guidelines between the government and the donors, Zutt said they were guided by the WB’s procurement guidelines for procurement activities. 

“We, however, are working to reform our procurement rule,” he said. Presenting a paper, NPPR Coordinator Kailash Raj Pokharel said most of the issues discussed in NPPR were old ones and problems identified several years ago have not been solved yet.