Nepal could see a reduction in foreign aid as the Covid-19 pandemic ravages the global economy and eats into the coffers of the developed countries from where most of the money flows, experts say.

In the fiscal year 2018-19, Nepal received foreign aid totalling $1.79 billion from multilateral and bilateral donors and international non-governmental organisations, according to the Development Cooperation Report 2018-19 published recently by the Finance Ministry.

Of the total largesse, multilateral and bilateral benefactors gave $1.57 billion, and international NGOs doled out $215 million. Bilateral donors accounted for 60 percent of the foreign aid Nepal received in the last fiscal and multilateral donors the rest, according to the report.

With the global economy bracing for a recession as the developed economies of the US and Europe become the latest epicentres of the pandemic after Wuhan, China, experts say that foreign aid from the developed countries could go down, and individual contributions to charities could also shrink.

“There might be aid cuts to the developing and underdeveloped countries due to the Covid-19 pandemic,” said Jagadish Chandra Pokharel, former vice-chairman of the National Planning Commission. “To what extent the assistance will go down will depend on how much economic impact the pandemic has on their economies, and how much moral responsibility they feel to help the poor nations.”

But he said that assistance through funds created for specific purposes, such as aid to promote green technology, could go up as the money will be given for particular purposes only.

In 1970, the United Nations set a target for the developed countries to contribute 0.7 percent of their gross domestic product as development assistance; but very few of them have met the goal.

Experts said that the virus crisis would give them a reason not to fulfil the commitment.

Economist Poshraj Pandey believes foreign aid from multilateral agencies such as the World Bank and Asian Development Bank will not be affected by the pandemic. “But I think foreign aid from bilateral givers will decrease sharply,” he told the Post in a recent interview.

According to Pandey, as multilateral donors have already committed funding for three to five years, aid flows will not be affected much.

Former finance secretary Shanta Raj Subedi is also confident that contributions from multilateral donors will not drop as they have been increasing funding in recent years. He is also optimistic about not losing much assistance from bilateral donors. “Even during the global financial crisis in 2008, we didn’t see any aid reduction from the US or Europe,” he said.

He sees chances of other countries filling the gap in aid money if the developed countries tighten the purse strings. “The traditional development partners may not want to lose their influence in Nepal by cutting down their aid significantly,” said Subedi.

Foreign aid is a key funding source for Nepal’s development efforts. In the last fiscal, official development assistance made up 24 percent of the national budget, according to the Development Cooperation Report.

While Nepal faces prospects of a slowdown in aid receipts, the government continues to have a hard time meeting its revenue collection targets. This will make foreign funding even more vital.

“Bilateral aid comes mostly for infrastructure development and capacity development,” said Subedi. “ If aid meant for infrastructure is cut, it will affect our development efforts.”

Although Nepal has adopted a policy of discouraging aid for capacity development and directing more money towards the infrastructure sector, building capacity has also become important as the provincial and local governments lack expertise to perform their constitutional duties.

“So an aid reduction in capacity development will not be good for the country at this moment,” said Subedi.

Stakeholders and experts also expect a fall in aid from international non-governmental organisations.

Foreign NGOs have been working in partnership with local NGOs in the areas of local development; and they are also providing support to service delivery, advocacy, raising awareness and strengthening accountability.

Achyut Luitel, president of the Association of International NGOs in Nepal, believes that there will be a massive change in the funding landscape.

“Because of the impact on employment and income of the general public in the West, there might be a significant decline in the resources of international NGOs which depend on funds from individuals who contribute to charities,” said Luitel.

“But the developed countries could seek to channelise their aid through international NGOs as opposed to private consulting firms to utilise their funds at the grassroots level.”

According to him, the governments of the developed countries in recent years have started providing funds to private firms to implement projects in the underdeveloped countries in order to reduce costs.

Luitel also sees prospects of a reorientation of international aid from foreign NGOs in the health sector as a result of the pandemic as they realise the importance of health infrastructure.

Pokharel, the former Planning Commission vice-chairman, expects funding from churches to international NGOs to swell at a time of crisis. “We have seen the activities of foreign NGOs that received funds from churches after the 2015 earthquake,” he said.