The World Bank has increased the interest rate on loans extended to Nepal by 0.75 percentage points, citing the country’s rise in per capita income.

Speaking at an orientation program on the Foreign Aid Mobilization System organized by the Ministry of Finance and the Nepal Association of Financial Journalists (NAFIZ) on Monday, Dhaniram Sharma, head of the Foreign Aid Coordination Division at the Ministry, said the new rate has come into effect from July. The interest rate on development assistance loans that Nepal has been receiving from the World Bank has been raised to 1.5 percent.

Sharma stated that the hike is a natural consequence of Nepal’s upcoming graduation from the list of least developed countries. “The World Bank has raised the interest rate effective this July. Previously, we used to take such loans with a repayment period of 40 years. Now, the maturity period has been reduced to 30 years from the previous 38 to 40 years,” he said.

He noted that since foreign aid implementation requires consensus between Nepal and the lenders, the country may not always receive assistance based on its priorities. He added that the World Bank accounts for around 80 percent of Nepal’s development assistance.

According to the division, development assistance will now align with the country partnership strategies recently introduced by the World Bank and the Asian Development Bank. It also said that donor agencies assess the quality and returns of all development projects funded through foreign assistance, which has limited the selection of projects as per Nepal’s demands.

At the event, Undersecretary Dolendra Sharma presented a paper on foreign aid mobilization practices in Nepal, noting that in some cases, committed assistance may not be disbursed as pledged. Similarly, Finance Ministry officials Prem Upadhyay and Bishesh Pradhan provided an overview of the Development Finance Information Management System. -- RSS