Development cooperation; time to act towards Sustainable Development Goals

KRISHNA SAPKOTA, KATHMANDU, April 23: Development cooperation is very significant in a resource-stripped country like Nepal where opportunities for foreign direct investment and private sector financing for national development are limited. As one of the important sources of development finance, foreign aid has seen increasing volume of its contributions to the Government budget of Nepal. Yet, the effective and judicious spending of this public money has not been realized as a critically important tool for ending extreme poverty and inequality in the country.

The Development Cooperation Report for fiscal year 2015-16, recently published by the Ministry of Finance, has revealed that the volume of aid allocation in the government budget is increasing every year but the expenditure has not shown satisfactory progress. There was only 35.34 per cent aid spending in 2015/16 (Rs 72.77 billion spent against Rs 205.89 billion), which is the worst case scenario recorded over the past six years.

In the year 2015/16, the volume of foreign aid disbursement reached a total of around USD 1242.45 million which was nearly 16 per cent of total budget (USD 7,804.45 millions). Out of this, the contribution of Official Development Assistance (ODA) was USD 1074.06 million (86 %) and of INGOs USD 168.39 million (14 %).

Of the total ODA disbursement, multilateral development partners shared USD 625.18 million (58 %) against USD 448.87 million (42 %) from bilateral development partners, the government official record shows.

Among the top multilateral development partners in the year is the World Bank Group (USD 243.69 million), followed by Asian Development Bank (USD 217.68 million), the United Nations Country Team (USD 113.57 million), the European Union (USD 29.48 million) and International Fund for Agriculture Development (USD 9.22 million).

Likewise, the top five bilateral development partners are the USAID (USD 118.93 million), United Kingdom (USD 89.47 million), Japan (USD 45.91 million), Switzerland (USD 36.98 million) and India (USD 35.76 million).

Compared to previous fiscal year, the volume of disbursement from World Bank Group, ADB and UN Country Team has increased in the year while on the other, the disbursement from USAID, UK and Japan has declined in the period.

It came to revelation that the energy sector has received the top ODA disbursement followed by local development, education, health, environment, Science and Technology, Peace and Reconstruction, Agriculture and Road Transportation. The energy sector received USD 150.58 million (14.02 %), local development (USD 119.15 million (11.09 %), education USD 111.55 million (10.39 %), health USD 103.44 million (9.83 %).

Out of the total amount disbursed in the fiscal year, the shares of grant, loans and technical assistance were USD 533.19 million (49.64 %), USD 374.75 million (34.89 %) and USD 166.11 million (15.47 %), respectively. It is noted that disbursement of loan assistance has significantly increased while disbursement for grants and technical assistance has dropped as compared to the previous fiscal year
The largest providers of grant disbursement included USAID (USD 84.51 million), UN Country Team (USD 73.76 million), World Bank Group (USD 58.60 million), ADB (USD 53.17 million) and UK (USD 51.66 million).

Likewise, the World Bank topped the list of highest amount of loan provider with USD 185.09 million followed by ADB (USD 158.49 million). UN Country Team (USD 39.81 million), UK (USD 37.81 million and USAID (USD 34.41 million) are top three in technical assistance providers in the year.

Ironically, as in the previous fiscal year, the region with the highest level of poverty i.e. far-western region received the lowest level of disbursement. The central development region received the highest disbursement amount of USD 253.20 million (inclusive of both on and off budget) and the far-western development region is in the bottom with USD 75.74 million.

It seems that disbursement delivered through on-budget project is also much higher in the central development region.

In the year, about 63 % of ODA (US$ 678.65 million) was disbursed through on-budget systems and 37 % (USD 395.41 million) through off-budget. On budget projects are found to be less fragmented compared to off-budget projects. The more the aid money is fragmented and spent through off-budget mechanisms the more chance it would go unaudited or unmonitored.

Comparing donor wise disbursement through on-budget modality, it is found that the World Bank Group, ADB, India, China, Finland and Germany, among others, have delivered above 90 % of their disbursement through government budget while Australia, Denmark and Korea, among others, provided 90 % disbursement through off-budget mechanisms in the year.

In terms of the strategic pillars of 13th development plan, 41 % of disbursement has been extended to the infrastructure development policy, 32 % to social development policy and 16 % to macroeconomic policy and economic development policy. Compared to last fiscal year, there has been a remarkable shift towards disbursement from social development to infrastructure development.

Development partners’ ODA portfolios in Nepal appear relatively fragmented. Each development partners on average is found to have been engaged in eight different counterpart ministries and agencies. However, many development partners are associated with more than 10 counterpart ministries and agencies. This clearly shows development partners need to pay their attention on concentrating resources in selected sectors where they have comparative advantages.

The evidence shows that the UN Country Team ahs largest number of projects (73) engaged with 17 counterpart ministries and agencies, followed by ADB 48 projects with 15 ministries/agencies and USAID 41 projects with 20 ministries/agencies.

From the counterpart ministry/agency perspective, it is found that the Ministry of Federal Affairs and Local Development has highest number of projects (65), followed by Ministry of Health (61) and Ministry of Agriculture Development (50).

Though aid money is crucial to meet the development aspirations of the country, it has to be mobilized in alignment with the development plans of the country. As Nepal is also the part of the ambitious global transformation agenda — 2030 Sustainable Development Goals — it requires increased level of investment and focused and mobilization of resources for future.