Nepal sets minimum limit for foreign aid, loans

The Nepal government has for the first time set a minimum limit for the amount under foreign aid, government officials said here Wednesday.

Endorsing the new Development Cooperation Policy-2014 this week, the government also has introduced a minimum amount for foreign grants, soft and commercial loans from the country's development partners, Xinhua reported.

The move was aimed at curbing rampant influx of foreign aid in meager amount and in unproductive sector.

As per the new policy, development or donor agencies must provide grants of at least $5 million while the minimum limit for soft loans has been set at $10 million for a programme or project.

Similarly, the government of the Himalayan country will not accept commercial loans less than $20 million for a programme or project.

A government report said that over 50 percent of the 293 projects in the current fiscal year are worth below $2 million each, which indicates that foreign aid in Nepal is concentrated in small projects with minimal impact.

Nepal's finance ministry, which prepared and unveiled the new policy, said the intention of setting limit in foreign aid was to discourage investment in unnecessary sectors and projects and to focus it on deserving and significant projects so as to achieve positive impact.

"The new policy also aims at improving the quality of foreign aid," said the chief of International Economic Cooperation Coordination division under the finance ministry.

He also said the new policy will help the government to be selective and focused in accepting foreign assistance.

The new policy has also given a clear instruction as to which sector/project can receive foreign aid and which cannot.

The new policy is aimed at minimising the off-budget flow of foreign aid, officials said.

The development cooperation report prepared by the finance ministry said the country received only 64 percent of foreign aid through budget in the fiscal year 2012-13. Development partners provided Nepal with foreign assistance worth $960 million during the period.

Similarly, around 23 percent of the total foreign aid commitments received in the first nine months of the current fiscal year is off-budget.