book1

The new debate, therefore, demands transparency and effi ciency of
“aid eff ec� veness” guided by prudent policies and ownership of na� onal
government to achieve be� er outcome of Millennium Development Goals.
The aid eff ec� veness can be seen in the overall context of the countries in
transi� on and their ability to overcome development defi ciencies by bringing
coordinated interna� onal coopera� on to complement recipient countries’
overall human and non-human capaci� es. Growing aid fragmenta� on owing
to undefi ned nature of division of labor among the aid agencies and entry
of mul� ple actors in various sectoral areas have nourished adverse impact
of the inten� on of aid and even weakened the government’s democra� c
accountability towards parliament, par� es, civil society, media, private
sectors and ci� zens. In this context, an assessment of eff ec� veness of aid in
many sectors of a country’s poli� cal economy like Nepal can help both the
policy makers and donors to understand the process of evalua� on of the
principles underlined in Rome, Paris, Accra and now in Busan in South Korea.
The democra� c principles of engagement in terms of ownership, alignment,
harmoniza� on, management of results and mutual accountability are
expected to bear posi� ve eff ects than the earlier strategies. In the light of
these concepts the ar� cles in this volume explain Nepal’s case refl ec� ng
various areas and suggest measures as to how aid eff ec� veness can be
increased benefi � ng the well-being of its people through balanced and
sustainable development.
Keshav Acharya explains the “Behavior of Foreign Aid through Recent
Poli� cal Phases.” His paper divides the span of 24 fi scal years (1986/87-
2009/10) into fi ve dis� nct poli� cal phases: 1) 1986/87-1990-91 as the poli� cal
party-less Panchayat era, (P) 2) 1991/92- 1995/96 as the post-democra� c
era (PD), 3) 1996/97-2000/2001 as Low Intensity Confl ict (LIC), 4) 2001/02-
2005-06 as High Intensity Confl ict (HIC), and 5) 2006/07-2009/10 as Poli� cal
Transi� on (PT), and examines the performance of foreign aid with respect to
its support to the na� onal budget, external economy, and the overall na� onal
economy of Nepal. There are three sources of fi nancing development
expenditures. They are foreign aid, revenue surplus (revenue less regular
expenditures) and domes� c borrowing. It clearly demonstrates that foreign
aid is s� ll the major source of fi nancing development expenditures. Its share
in the development expenditures ranged from a high of 49 percent in P years
to a low of 34 percent in the PD years. Currently it stands at 39.1 percent.
What is pleasing is, since the HIC years, most of it is coming in the form of
grants. Revenue surplus also contributed signifi cantly in the post democracy
years. Thus, since the onset of the confl ict, development expenditure
has been largely relying on the ODA, that too on grants. The expenditure
composi� on has undergone a great structural shi� and increasing share of
the total expenditure is consistently being fi nanced by addi� onal revenue
eff orts. During decade-long confl ict, the share of development expenditure
got compressed by 34 percentages. On fi nancing of the total expenditures,
revenue mobiliza� on has been occupying prominent place. But, when
analyzing the sources of addi� onal revenue, one should be cau� ous.
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