Nepal received the largest amount of foreign aid in the education sector in the last fiscal year, according to the latest report of the Finance Ministry.

Four sectors — education, local development, health, and road transportation sector — received above $100 million each in the last fiscal year,” the Development Cooperation Report for fiscal year 2010-11 said.

“The education sector received $202.8 million, local development $135.1 million, health $129.6 million, and road transportation sector received $111 million,” it said, adding that the country received an official development assistance from over 40 donors, including 35 resident agencies.

About half the aid resources use national systems like budget or procurement systems and a significant portion of aid is spent outside national systems, which the aid monitors have recently started questioning due to the lack of effectiveness sans transparency.

Similarly, the World Bank Group topped the list among the largest donor for Nepal in the last fiscal year. “The World Bank Group ($256.1 million), the Asian Development Bank ($184.4 million), the UN Country Team ($112.5 million), the EU ($42.4 million) and the Global Fund to fight AIDS, Tuberculosis and Malaria ($19 million) were the top five multilateral donors in the last fiscal year,” the report stated, adding that the UK ($92.1 million), Japan ($58.7 million), India ($50.7 million), US ($48.5 million) and Norway ($32.8 million) were the top five bilateral donors.

This fiscal year too, the government has expected an aid commitment of Rs 110 billion from the multilateral and bilateral donors, according to finance secretary Krishnahari Baskota. “But the rate of disbursement will depend on our absorptive capacity,” he said, adding that the ministry has set up the Aid Management Platform (AMP) — an online information system in the Ministry of Finance — for aid transparency and aid predictability.

“All development partners have been given access and requested to report regularly,” he added. Due to the low effectiveness of foreign aid, both the government and donors have been under pressure to become more transparent, apart from increasing capacity building to absorb foreign aid as there is a huge gap between the commitment and disbursement.

Disbursements for fiscal year 2010-11 correspond to $40.6 of foreign aid per capita, a relatively low figure, compared with countries with a similar level in the human development index like Senegal ($84 per capita).

The donors reported total disbursements amounting to $1.08 billion in fiscal year 2010-11. “Of the total, around 58 per cent came from multilateral donors, while 36 per cent came from OECD-DAC bilateral donors and over six per cent from bilateral South-South cooperation partners,” it stated. “Similarly, an analysis of the types of aid received in the last fiscal year revealed that grants represent 57 per cent of disbursement, loans 24.3 per cent and technical assistance 18.5 per cent.”

Foreign aid represents 5.8 per cent of the country’s GDP, according to the report prepared by the Foreign Aid Coordination Division of the Ministry of Finance. Foreign aid plays a key role in socio-economic development representing 26 per cent of the budget.

Meanwhile, the ministry has also planned to hold a meeting with development partners next month followed by another such meet in April. It has hoped to create an environment for the development partners to assist in economic development. It has vowed to start consultations with donors to hold the Nepal Development Forum meet, which was earlier scheduled for February.

source: The Himalayan Times,16 March 2012