The UN’s decision to provisionally set aside $21.6 million for Nepal marks an unprecedented step for its Fund for Responding to Loss and Damage (FRLD), which has yet to disburse money to any country since its establishment in 2022. But the allocation is only the first step towards addressing Nepal’s estimated $4.7 billion recovery and reconstruction needs. 

 The decision follows Nepal’s urgent appeal for assistance after the Rasuwa disaster. While the Fund’s Board has hailed the move as a “landmark decision” that demonstrates its ability to respond as an “agile and efficient responder”, Nepal must  submit a funding proposal, undergo technical assessment and secure a final approval from the Fund’s Board. It has not set a deadline for disbursement.

The decision could also set a precedent for other climate-vulnerable countries seeking emergency assistance from the Fund. Yet it highlights two persisted challenges — the difficulty of translating an emergency allocation into timely support for affected communities, and the scarcity of resources available to address climate-related loss and damage.

Against this backdrop, the Board convened its “first extraordinary” meeting and agreed to pilot an approach under the existing Barbados Implementation Modalities (BIM). This allows Nepal to seek funding for a specific disaster outside of FRLD’s regular application window. The Board hailed the move as a “landmark decision”, showing its potential to be an “agile and efficient responder”.

“This historical decision is a huge step forward but it is just a pebble in the mountain of needs,” said Sunil Acharya, global lead for just transition at the not-for-profit organisation Recourse.

Out of the $21.6 million set aside, $1.6 million will go toward oversight costs, leaving $20 million in potential assistance, less than 0.5 percent of Nepal’s estimated $4.7 billion recovery and reconstruction needs. The preliminary assessment captures only quantifiable economic losses, leaving the scale of non-economic losses outside the full calculation.

The allocation also raises questions about Nepal’s three earlier proposals submitted through the Fund’s regular funding window. An application by the Alternative Energy Promotion Center had reportedly reached the final stage of evaluation.

Questioning the amount, Ali Tauqeer Sheikh, Pakistan’s representative on the FRLD Board, said at the Fund’s meeting, “I still have not understood the reason for $21.6 million. Why can't it be higher or lower? We are predetermining the needs based on our BIM allocations.” 

The Board said the allocation was constrained by the Fund's available financial resources.

The shortfall is also evident at the local level. In Gosaikunda Rural Municipality alone, private housing losses alone are estimated at $68 million, according to the government’s Rapid Damage and Needs Assessment. 

“The $20 million allocation covers less than 30 percent of that. It is welcome in principle, but inadequate in practice,” said Sunil Tamang, an environmental research scientist at the University of Canterbury and a native of Syabrubesi in Rasuwa. “These are upstream villages that never received an early warning.”

Maheshwor Dhakal, an alternate member of the FRLD board who also serves as the chief of Climate Change Management Division at Nepal’s Ministry of Forests and Environment, told Kantipur  that it is separate from the urgent amount allocated for Nepal.

However, the Fund has already received eight times more funding requests than its budget from 119 countries. Given the severely limited budget, experts warned that other countries devastated by climate related disasters may question the fairness of Nepal receiving assistance repeatedly.

Decisions for the earlier proposals are expected at the board’s 10th meeting in December, said Manjeet Dakal, advisor to the Chair of the Least Developed Countries (LDC) group on climate change. 

When questioned how the funds might be used, Manjeet Dhakal added, “Most likely it will be invested in rehabilitation, reconstruction.” 

He also recommended addressing non-economic loss and damage including, “counseling for psychological trauma,” as well as support for displaced communities, early warning systems and emergency preparedness. 

In an interview with Kantipur, Maheshwor Dhakal said , “The funds will be mobilized according to Nepal government’s priorities, with the aim of ensuring 100 percent reaches the local level.” He said the proposal will be developed in consultation with local governments, provincial authorities, and ministries, “based on the priorities of victims of Bhotekoshi floods, whether it is food security, rural infrastructure, or livelihoods.”

But at a time when communities need early warning in seconds and responses within hours, climate justice is also about how efficiently the Nepali government delivers to its citizens in the aftermath of disasters, said Tamang. 

“People are still in temporary shelters, they haven’t received funds for funeral rituals, the transmission of funds definitely needs to be sped up,” he added. 

Calling for an expedited, rapid decision to disburse the funds instead of waiting for the Board’s next meeting in December, Sheikh also said in the meeting, “The extraordinary meeting has already taken much longer, and the people of Nepal and the government of Nepal cannot wait any longer.”

Manjeet Dhakal suggested that, once approved, the fund can be expected to be disbursed before March 2027, when the Board is set to hold its 11th meeting in Nepal, however, he said it is difficult to say for certain. 

Climate vulnerable developing countries around the world were also closely watching the decision. It could have set a precedent for seeking emergency assistance from the Fund following climate induced disasters. The Board said it would “assess lessons” from Nepal’s case for its long-term model, but stopped short of treating the exceptional decision as a permanent rapid-response mechanism, a move Sheikh said was “against the sentiments of many developing countries.”

For nations that have long advocated for a rapid-disbursement mechanism, Nepal’s case still signals that the doors have opened. But the larger challenge is sustaining the Fund, not simply opening the doors.

Brenda Mwale, outreach lead of the Loss and Damage Collaboration told the Post, “The Board can develop procedures to respond quickly, but without adequate and predictable financing, it will not be able to deliver.”

Mwale’s organization has been identifying additional financing mechanisms, including climate damages tax, that could help sustain the Fund. “There is enough money in the world to support countries facing climate disasters,” she said.

“What we lack is the political will and power to direct those resources towards climate action.”