October 20: Nepal’s foreign loan has surpassed foreign grant assistance in recent days due to the poor bargaining power of the government with donor agencies.

The donor agencies consult with the government while adopting policy for providing foreign aid. However, the government authorities of Nepal have been signing agreements with donor agencies haphazardly without being able to present the ground reality to them. This has reportedly led to an increase in  foreign loan. 

According to the Ministry of Finance, donor agencies had committed loan of Rs 105 billion to Nepal in fiscal year 2075/76 and Rs 189 billion in FY 2976/77.

Likewise, the grants pledged by donor agencies in FY 2075/76 was Rs 33 billion and Rs 30 billion for FY 2076/77.

According to the finance ministry, foreign assistance for loan has increased by 80 percent in  FY 2076/77 compared to FY 2075/76 while the foreign grant has declined by 10 percent.

The government has set a target to receive loan assistance of Rs 299 billion and grant assistance of Rs 60.52 billion from various donor agencies to implement the budget of the current fiscal year.

Economists believe that the loan assistance that the government is seeking from donors is quite ambitious.

Economist Keshav Acharya says that the reason for donor agencies not willing to provide more grant assistance is the lack of bargaining power of the government as well as its failure to take the donor agencies into confidence.

Acharya says foreign grants have more preconditions than foreign loan and therefore the authorities prefer to take loan instead of grants. He says that the loan taken by Nepal is not much till date but stresses that the loan must be properly utilized.

Former Chairman of the National Planning Commission Dipendra Bahadur Chhetri says it is not appropriate for the government to take unproductive loans from donor agencies to fulfill their political interests.

“We should take loan for the sector where there is good return. But God knows where we are heading by taking loan for fulfilling vested political interests. It is something unimaginable,” says Chhetri.

He argues that the loan taken for the Prime Minister’s Employment Programme is distributive in nature and will not give anything in return. It has only added the burden of loan for the future generation, says Chhetri. He says that the government’s decision to take loan for distribution will not bear good results.