Nepal’s foreign aid disbursement grew 16 percent to $1.62 billion in the last fiscal year that ended mid-July, with majority of the funds going towards economic reform, education, urban development, health and local development.

Of the total disbursement amount, 50.5 percent was in the form of loan, 35.1 percent in grant and 14.4 percent in technical assistance. 78 percent of the foreign aid has been received under on-budget headings, meaning that this amount has been reflected in the government’s annual budget book. 

The Development Cooperation Report 2018 released by the Finance Ministry on Wednesday shows the World Bank contributing the most in development aid to Nepal in the last fiscal year, amounting to $533.51 million, up 54 percent as compared to the previous fiscal year.

A comparative analysis of the aid disbursement shows the World Bank’s financial support to Nepal significantly increasing after the earthquake of April, 2015. During that year, disbursement was $188.12 million. Of the total disbursed amount, 97.8 percent was on-budget.

The Asian Development Bank was the second highest multilateral lending agency to Nepal, disbursing $291.69 million in aid last fiscal year, up 14.88 percent. Out of this disbursement, 95 percent was on-budget.

The United Kingdom emerged as the third largest donor agency with total aid disbursement amounting to $123.87 million. However, the aid disbursement from the UK has dropped by 3.46 percent last fiscal year, as compared to the previous fiscal year. 

Under the bilateral donor category, Nepal’s closest neighbours, India and China, however, were not in the top five. 

China and India stood at 8th and 9th respectively, in terms of providing development assistance to Nepal. 

The ministry’s report shows that aid from China jumped 42.38 percent to $58.72 million in the last fiscal year. The report also shows development aid from China increasing significantly after the 2015 earthquake.

From India, Nepal received $56.76 million in the last fiscal year, down 4.2 percent. 

As Nepal has been receiving more than one-third of the donor’s money in the form of grants, Finance Minister Yubaraj Khatiwada said that this figure would drop in the coming years as Nepal has made a number of institutional reforms, increasing its capacity to pack back its loans. 

“It’s clear. Drop in grant means our loan will grow,” he told a press conference on Wednesday. “As Nepal aims to graduate to the league of developing nations by 2022, we will have to focus on mobilising the loans received under the low interest rate more prudently and in a transparent manner.”

Breaking down the disbursement sector-wise, the economic reform sector received the highest disbursement of development assistance in 2017-28, followed by the education, urban development, health and local development sectors. 

The report said that the economic reform sector, for the first time since 2010-11, became the sector receiving the highest foreign aid disbursement in 2017-18. 

Annual disbursement in the economic reform sector rose significantly to $210.7 million in 2017-18, from $35.1 million in 2016-17. “The increase in disbursement was due mainly to the implementation of ‘First Programmatic Fiscal and Public Finance Management Development Policy Credit’ funded by the World Bank,” the report stated. 

The education sector was the second highest recipient, with development aid amounting to $202.2 million. The education sector represented 12.5 percent share of total aid disbursement to Nepal.

Disbursement on urban development amounted to $148.7 million, health received $145.2 million, local development $135.8 million, energy $116.7 million and housing $89 million. 

Similarly, aid disbursement in road transportation was $78.3 million, agriculture $77 million, drinking water $68.45 million, peace and reconstruction $50.4 million and post-earthquake reconstruction $49 million.

Although, Nepal had received aid committments worth $4.1 billion for post-earthquake reconstruction, only 23 percent has been disbursed so far in the past three years,” said Shree Krishna Nepal, chief of the Foreign Aid Division of the Finance Ministry.