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NepalFOREIGN AID, NEPAL
Nepal has been a recipient of foreign assistance since
1952
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
different
name, by the British Commonwealth countries in 1951.
During the
1950s, many Nepalese received scholarships through the
Colombo Plan
to go to different countries for studies in technical and
professional areas.
Also during that time, all other aid was in the form of
grants.
The bulk of assistance was directed toward developing
agriculture,
transportation infrastructure, and power generation. Other
areas
targeted for assistance were communications, industry,
education,
and health. India and the United States each were
responsible for
more than one-third of all grants. Both countries
established aid
missions to Nepal and directed aid to special projects.
Other major
donors during the 1950s were China and the Soviet Union.
Britain,
Switzerland, Australia, Japan, and New Zealand also were
involved
in lesser assistance programs. The United Nations (UN)
provided
some technical assistance.
Until the mid-1960s, Nepal depended mostly, if not
totally, on
foreign grants for all its development projects. Most of
these
grants were on a bilateral basis. Grants from India helped
to build
the airport in Kathmandu, the Kosi Dam, and various
irrigation
projects. The Soviet Union helped to build cigarette and
sugar
factories, a hydroelectric plant, and part of the
East-West
Highway. Grants from China helped to construct roads; a
trolley bus
line in Kathmandu; and leather and shoe, brick, and tile
factories.
United States grants supported village development,
agriculture,
education, and public health. The United States also
helped to
start the Nepal Industrial Development Corporation, which
granted
loans to several industries
(see Money and Banking
, this
ch.).
Beginning in the 1960s, some bilateral assistance was
in the
form of loans. The loan share of foreign aid increased
from under
4 percent between 1965 and 1970 to more than 25 percent by
the
1985-88 period (see
table 18, Appendix).
In the 1970s, multilateral assistance programs started
to play
an important role in development planning and accounted
for more
than 70 percent of funding for development planning. By
the end of
the 1980s, the great majority of foreign aid was in the
form of
multilateral assistance programs. The major sources of
borrowing or
grants for these programs were the International
Development
Association of the World Bank and the Asian Development
Bank. Most
of these loans could be characterized as
soft loans (see Glossary).
Sources of foreign aid were numerous. Eleven UN
agencies, seven
multilateral lending agencies (such as the World Bank),
and eight
private agencies (for example, the Ford Foundation) had
participated in aid programs. At least seventeen countries
offered
bilateral assistance. Under the auspices of World Bank,
the Nepal
Aid Group was created in 1976. By 1987 sixteen countries
and six
international agencies participated in the group. The
level of
commitment from the Nepal Aid Group had increased from
Rs1.5
billion in 1976-77 to Rs5.6 billion in 1987-88. The bulk
of foreign
aid contributions after 1976 came from this group.
Most economic development projects were funded with
external
assistance on concessional terms. In the mid- to late
1980s,
recorded aid disbursements averaged more than US$200
million
annually--about 7 percent of GDP. More than 70 percent of
the aid
was in the form of grants; the remainder was in the form
of
concessional loans. A high percentage of technical
assistance and
direct aid payments were not documented. Much of the aid
granted
was underused (see
table 19, Appendix).
As of 1991, Nepal was receiving external assistance in
the form
of project aid, commodity aid, technical assistance, and
program
aid. Project aid funded irrigation programs, hydroelectric
plants,
and roads. Commodity assistance targets included
fertilizers,
improved seeds, and construction materials provided by
donor aid
agencies. Technical assistance covered services of experts
to
advise the government in training indigenous personnel to
perform
research in technological fields and resulted in the
development of
skilled labor. Program aid supported various projects, in
particular the agricultural and health fields.
Dependence on foreign aid was increasing. Between 1984
and
1987, foreign aid as a percentage of GNP increased from
under 8
percent to almost 13 percent. Debt service as a percentage
of GDP
increased from less than 0.1 percent in 1974-75 to almost
1 percent
in 1987-88. Outstanding debt in this period increased from
Rs346
million to almost Rs21 billion.
From FY 1970 through FY 1988, United States
commitments,
including United States Export-Import Bank
(Eximbank--see Glossary)
funds, totaled US$285 million. In the 1980s, bilateral
United
States economic assistance channelled through the Agency
for
International Development averaged US$15 million annually.
The
United States also contributed to various international
institutions and private voluntary organizations that
serviced
Nepal for a total contribution to multilateral aid in
excess of
US$250 million in the 1980s. Other Western countries and
official development assistance
(ODA--see Glossary)
and bilateral commitments for the 1980-87 period totaled US$1.8 billion.
The
Organization of Petroleum Exporting Countries (OPEC)
provided US$30
million in bilateral aid from 1979 to 1989. Communist
countries
provided US$273 million in aid from 1970 to 1988. From
1981 until
1988, Japan was the premier source of bilateral ODA for
Nepal,
accounting for more than one-third of all funds. The
second biggest
donor during that period was the Federal Republic of
Germany (West
Germany).
Data as of September 1991
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