FOREIGN AID, NEPAL
Nepal has been a recipient of foreign assistance since
when it joined the Colombo Plan for Cooperative, Economic,
and Social Development in Asia and the Pacific
(Colombo Plan--see Glossary).
The plan was established, under a slightly
name, by the British Commonwealth countries in 1951.
1950s, many Nepalese received scholarships through the
to go to different countries for studies in technical and
Also during that time, all other aid was in the form of
The bulk of assistance was directed toward developing
transportation infrastructure, and power generation. Other
targeted for assistance were communications, industry,
and health. India and the United States each were
more than one-third of all grants. Both countries
missions to Nepal and directed aid to special projects.
donors during the 1950s were China and the Soviet Union.
Switzerland, Australia, Japan, and New Zealand also were
in lesser assistance programs. The United Nations (UN)
some technical assistance.
Until the mid-1960s, Nepal depended mostly, if not
foreign grants for all its development projects. Most of
grants were on a bilateral basis. Grants from India helped
the airport in Kathmandu, the Kosi Dam, and various
projects. The Soviet Union helped to build cigarette and
factories, a hydroelectric plant, and part of the
Highway. Grants from China helped to construct roads; a
line in Kathmandu; and leather and shoe, brick, and tile
United States grants supported village development,
education, and public health. The United States also
start the Nepal Industrial Development Corporation, which
loans to several industries
(see Money and Banking
Beginning in the 1960s, some bilateral assistance was
form of loans. The loan share of foreign aid increased
4 percent between 1965 and 1970 to more than 25 percent by
1985-88 period (see
table 18, Appendix).
In the 1970s, multilateral assistance programs started
an important role in development planning and accounted
than 70 percent of funding for development planning. By
the end of
the 1980s, the great majority of foreign aid was in the
multilateral assistance programs. The major sources of
grants for these programs were the International
Association of the World Bank and the Asian Development
of these loans could be characterized as
soft loans (see Glossary).
Sources of foreign aid were numerous. Eleven UN
multilateral lending agencies (such as the World Bank),
private agencies (for example, the Ford Foundation) had
participated in aid programs. At least seventeen countries
bilateral assistance. Under the auspices of World Bank,
Aid Group was created in 1976. By 1987 sixteen countries
international agencies participated in the group. The
commitment from the Nepal Aid Group had increased from
billion in 1976-77 to Rs5.6 billion in 1987-88. The bulk
aid contributions after 1976 came from this group.
Most economic development projects were funded with
assistance on concessional terms. In the mid- to late
recorded aid disbursements averaged more than US$200
annually--about 7 percent of GDP. More than 70 percent of
was in the form of grants; the remainder was in the form
concessional loans. A high percentage of technical
direct aid payments were not documented. Much of the aid
was underused (see
table 19, Appendix).
As of 1991, Nepal was receiving external assistance in
of project aid, commodity aid, technical assistance, and
aid. Project aid funded irrigation programs, hydroelectric
and roads. Commodity assistance targets included
improved seeds, and construction materials provided by
agencies. Technical assistance covered services of experts
advise the government in training indigenous personnel to
research in technological fields and resulted in the
skilled labor. Program aid supported various projects, in
particular the agricultural and health fields.
Dependence on foreign aid was increasing. Between 1984
1987, foreign aid as a percentage of GNP increased from
percent to almost 13 percent. Debt service as a percentage
increased from less than 0.1 percent in 1974-75 to almost
in 1987-88. Outstanding debt in this period increased from
million to almost Rs21 billion.
From FY 1970 through FY 1988, United States
including United States Export-Import Bank
funds, totaled US$285 million. In the 1980s, bilateral
States economic assistance channelled through the Agency
International Development averaged US$15 million annually.
United States also contributed to various international
institutions and private voluntary organizations that
Nepal for a total contribution to multilateral aid in
US$250 million in the 1980s. Other Western countries and
official development assistance
and bilateral commitments for the 1980-87 period totaled US$1.8 billion.
Organization of Petroleum Exporting Countries (OPEC)
million in bilateral aid from 1979 to 1989. Communist
provided US$273 million in aid from 1970 to 1988. From
1988, Japan was the premier source of bilateral ODA for
accounting for more than one-third of all funds. The
donor during that period was the Federal Republic of
Data as of September 1991