Government's Spending Weak Despite Increase in Foreign Aid

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Government's Spending Weak Despite Increase in Foreign Aid

February 14: The government has been struggling to spend foreign aid received in grants and loans. The government had decided to mobilize Rs 60.52 billion in foreign grants and Rs 200.99 billion in external loans for various programs for the current fiscal year 2020/21. But, the performance to utilize the foreign aid remains weak, according to the Ministry of Finance's mid-term review report of the budget for the current fiscal year.

The World Bank had approved Rs 111 billion for Nepal in the current fiscal year of which only Rs 13.48 billion has been spent, shows the mid-term review report of the government. Likewise, the Asian Development Bank had decided to extend foreign assistance of Rs 92.84 billion of which only Rs 6.99 billion has been spent. Out of Rs 25.68 billion approved by the International Monetary Fund, the government has been able to spend only Rs 4.66 billion.

Similarly, India and Japan had decided to provide huge amount of funds for the School Sector Development Plan (SSDP), but the government has not been able to spend them.

In the recently unveiled half-yearly budget review, the Ministry of Finance (MoF) admitted that government's capacity to utilize foreign aid has not been satisfactory.

According to the report, low spending of foreign aid has been attributed to inability to utilize funds in accordance to national needs and priority, failure to remove fragmentation of foreign aid and lack of project banks in local levels and provinces, among others.

“The spending under the foreign aid has declined by 24.17 percent,” sates the report.

According to MoF, the maximum amount of foreign aid has been spent on public service this year with an expenditure of Rs 155 billion. Similarly, Rs 72.79 billion has been spent on the education sector, Rs 62.78 billion on economic affairs, Rs 25.26 billion on  social service and Rs 25.6 billion for law and order and security.

The Ministry of Finance plans to invest foreign aid in sectors that give better return and all the foreign aids would be brought under the one-door system.

Economist Keshav Acharya says it is very unfortunate that that government has been able unable to spend the foreign aid effectively. According to him, foreign spending can be made effective by changing the working procedures of the government and making contractors accountable.

 

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