Energy sector received highest foreign aid commitment last FY

THE energy sector got the highest foreign aid commitment in last fiscal year 2012-13. The sector received Rs 42 billion out of total commitments worth Rs 115.15 billion, thanks to a huge commitment of Rs 33 billion for Tanahun hydropower project. The reservoir-type project being developed by the government has received aid pledge from Japan International Cooperative Agency (JICA), Asian Development Bank and European Investment Bank. The energy sector is followed by education, agriculture, transport and local development sectors in terms of the size of the aid commitments last fiscal year, according to the

Finance Ministry. Education and health were traditionally the big receivers of foreign aid, while agriculture was one of the most neglected sectors. But agriculture received the third largest aid commitment of Rs 10.92 billion in FY 2012-13, while education got Rs 11.53 billion. “As our priority has gone to energy and agriculture lately, we have asked donors to provide more resources for these sectors,” Madhu Marasini, chief of international economic assistance coordination division at the Finance Ministry. “Donors also re-prioritised these sectors which reflected in the aid commitment.” Energy and agriculture were among the top three sectors in terms of aid disbursement in fiscal years 2011-12 and 2010-11. In FY 2011-12, the electricity sector had received the fourth largest aid disbursement, while agriculture was sixth, according to the Development Cooperation Report 2011-12. In the previous year, the electricity sector was sixth and agriculture ninth. During the first decade of this century, both the sectors were less prioritised, thus the percentage of aid provided to these sectors declined massively, but the social sector received increased foreign aid. According to the Third Progress Report on Millennium Development Goals, foreign aid to agriculture, irrigation and forestry declined to 6.30 percent in FY 2008-09 from 22.84 percent in FY 2001-02. Also, aid to transport, electricity and communication decreased to 17.32 percent from 41.06 percent over the period. The aid to social sector rose to 67.94 percent from 32.57 percent. “During the first decade of this century, both government and donors’ focus remained on achieving MDG where most of indicators are related to the social sector,” said Marasini. Former vice-chairman of the National Planning Commission (NPC) Dipendra Bahadur Kshetry said donors realised the need for increased investment in the energy sector after seeing the load-shedding problem. Despite slow start in foreign aid commitment last fiscal year, it jumped in the later months and surpassed the commitment in the previous fiscal year. According to the ministry, donors pledged Rs 115.15 billion in 2012-13—up from Rs 107 billion in FY 2011-12. Kshetry said the lack a full budget presentation until April last year resulted in lower aid commitment in the initial months, but the donors signed aid agreements in later months. “Donors usually seek longterm plan for pledging aid,” he said. The World Bank (WB), the biggest donor for Nepal, pledged Rs 38.72 billion in 2012-13 which the bank said is the highest ever commitment in a year. “Another important feature of last fiscal’s commitment is the volume of the commitments has gone up, while number of the project has gone down,” said Marasini. The number of projects for which aid was committed last fiscal year stood at 31—down from the previous years’ 49, according to the ministry. Higher number of projects instead of big ones has been blamed for aid fragmentation that yielded little results. While prioritising the infrastructure sector, the government has been receiving more loans than grant. According to the ministry, 53.2 percent of total aid commitment made last fiscal year was loan, while the rest was grant. “Donors usually provide aid for infrastructure sector in loan format which resulted in higher loan ratio compared to grant,” said Marasini. TOP FIVE SECTORS Sectors Aid pledge Energy (clean) Rs 42.07 billion Education Rs 11.53billion Agriculture Rs 10.92 billion Transport Rs 8.67 billion Local Dev Rs 8.00 billion TOP FIVE MULTILATERAL DONORS Donors Aid pledge World Bank Rs 38.72 billion ADB Rs 27.10 billion European Invest. Bank Rs 6.41 billion IFAD Rs 3.42 billion European community Rs 971 million TOP FIVE BILATERAL DONORS Donors Aid pledge Japan Rs 14.56 billion United Kingdom Rs 9.63 billion Denmark Rs 3.13 billion China Rs 3.00 billion Norway Rs 2.34 billion As our priority has gone to energy and agriculture lately, we have asked donors to provide more resources for these sectors