Nepal is experiencing a sharp decline in foreign aid at a time when revenue collection is not meeting expectations. Its development objectives are being impeded due to falling foreign aid and revenue collection. Over the last four years, the total amount of foreign assistance, including grants and concessional loans, has decreased by about Rs 61 billion. Although a number of donor organizations have committed aid, the actual amount received has fallen short of expectations. Major infrastructure, health, and education projects are thus underfunded. The Finance Ministry is aware that inadequate capital expenditures have delayed donor reimbursements, further depleting available funds. In fiscal year 2021/22, aid totaled Rs 174.18 billion. The amount of aid in the fiscal year 2077/78 was Rs 174.18 billion. This number dropped to Rs 113 billion by 2024/25. Grants plummeted to Rs 9.16 billion, while concessional loans dropped to Rs 65.74 billion by mid-March this year. Experts attribute this decline to a number of factors, including poor project management and changes in international aid patterns. A diminished ability to borrow and spend is the leading issue, according to the National Planning Commission. As such, the chances of reaching the recently updated aid targets appear slim.
52% of country's foreign aid went to province 3
Nepal should take this situation as a wake-up call to cease relying solely on foreign funding to support its development. Uncertain contributors affect national autonomy and cause delays in planning and execution. All too often, the government authorizes projects that deplete the nation's resources without producing observable outcomes. Resources are lost as a result of subpar procurement, incomplete projects, or initiatives that don't meet local needs. Nepal should focus on what it can efficiently plan, fund, and execute rather than pursuing projects based on donor interest. The focus of a development strategy should be on internal strengths. Increased local investment, better budget discipline, rewriting tax structures, and better mobilization of domestic resources can all help reduce reliance. Involving the diaspora through joint projects or investment bonds could provide additional funding. Nepal should also reconsider how it engages with development partners; aid ought to support national objectives rather than impose them. Over-reliance on concessional loans, even those with low interest rates, can lead to long-term debt if the outcomes don't support development.
Donors continue to support Nepal despite their growing impatience. Lack of accountability, legal challenges, and contractor work delays have eroded confidence of all concerned. If projects fail or stall, more help promises are unlikely. Long-term solutions require legislative changes that encourage self-reliance, even though continuing discussions with development partners may provide temporary respite. A country cannot be called a consistently developed one if it cannot construct schools, roads, or hospitals without first requesting outside funding. Money must not be a determining factor in development, while leadership that avoids projects with high maintenance costs and low returns is required. Meanwhile, foreign help can kick-start a project, but the continuation of development depends on local or domestic resources. It is therefore essential to plan for a future that does not rely on foreign donors, which, however, calls for effective prioritizing, prudent budgeting, and sound execution of all development projects.
