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200 180 160 140 120 100 80 60 40 20 0 Repayment of Principal and Interest on Foreign Loans as percent of (1986/87-1990/91) Panchayat Era (1991/92-1995/96) Post-Democracy Era Table 1.4 Foreign Aid and the External Economy Panchayat Era (1986/87- 1990/91) (1996/97-2000/01) Low Intensity Confl ict Era (2001/02-2005/06) High Intensity Confl ict Era Post- Democracy Era (1991/92- 1995/96) (2006/07-2009/10) Poli� cal Transi� on Era Low Intensity Confl ict Era (1996/97- 2000/01) Merchandize Exports Remi� ances Gross Aid Net Aid High Intensity Confl ict Era (2001/02- 2005-06) Poli� cal Transi� on Era (2006/07- 2009/10) In percent of total Forex Earnings: Merchandize Exports 29.9 41.4 37.7 18.4 12.5 Remi� ances 5.1 58.6 10.6 46.5 60.2 External Debt Stock 284.7 310.8 309.1 196.2 91.9 Gross Aid Infl ows 59.2 34.5 30.4 16.5 13.0 Net Aid Infl ows 50.2 24.1 21.0 10.3 9.2 Net Foreign Loans 34.0 13.8 10.8 0.3 0.1 Foreign Grants Repayment of 16.2 10.3 10.2 10.0 9.3 Principal and interest on Foreign Loans 9.0 10.4 9.3 6.2 3.8 B. Repayment of Principal and Interest on Foreign Loans as percent of: Merchandize Exports 30.0 25.2 25.0 33.6 30.1 Remi� ances 176.2 17.8 88.0 13.3 6.3 Gross Aid 15.2 30.2 30.8 37.5 29.0 Net Aid Source: Table 1.3 17.9 43.2 44.4 60.0 40.8 Changing paradigms of aid eff ec� veness in Nepal 9
An intriguing fact about the whole trend is that with the onset of the crisis, the gap between exports and gross foreign aid is consistently narrowed down. Incidentally, in the PT years, foreign aid exceeds exports by a small margin of 0.5 percent of the total foreign exchange receipts. What clearly emerges is the fact that over the years and phases, foreign aid is turning into less important sources of suppor� ng Nepal’s Balance of Payments (BOP). Nepal’s external sector or BOP is ge� ng much more reliant on remi� ances than any other sources. On the part of foreign aid, it is grant rather than loan which is rela� vely growing over the years. On the external debt burden, let us look into the stock and fl ow terms. Nepal is ge� ng less and less indebted. The stock of external debt increased from 2.8 years’ equivalent of total annual foreign exchange earnings in P years to 3.1 years’ equivalent during the PD phase. It stagnated at 3.1 years’ equivalent during the LIC era and less than two years’ in the HIC. In the ongoing PT phase, the total stock of external debt stands at less than a year’s worth of total foreign exchange earnings. This is an outcome of two factors. The fi rst and the foremost factor is the con� nuous surge in remi� ances; and the other, though of lesser importance, is a turn-around in the composi� on of aid - from predominance of loans in the earlier years to grants in the successive years. While viewing external debt servicing in fl ow terms, the scenario is consistently improving. Repayment of principal and interest on foreign loans amounted to nine percent of total foreign exchange earnings in the PD years. It started to decline steadily from LIC years; 9.3 percent in LIC, 6.2 percent in HIC, and to a further low of 3.8 percent in the ongoing PT years. This means, Nepal can service a far higher volume or size of foreign loans, thanks to workers’ remi� ances. Debt servicing amounted to 30 percent of exports and 1.8 � mes of remi� ances in the P years (panel B of table 1.4). It improved to a quarter of exports and 17.8 percent of remi� ances in PD years. Currently it is 30.1 percent of exports and a meager 6.3 percent of remi� ances. Even compared to gross ODA infl ows, debt servicing amounted to 15.2 percent in phase P, 30 to 38 percent in phases PD, LIC and HIC and stands at 29 percent today. There are three major issues that Nepal should consider in the management of the external sector of its economy. The fi rst and the foremost important factor is the rela� ve decline of exports. For GDP growth, employment genera� on and poverty allevia� on, export promo� on should be encouraged by all. It seems the surging of remi� ances inculcated complacency and iner� a on the part of the authority and the private sector. Recently poor export performance has sounded the alarm to all. Secondly, remi� ances are responsible for pushing up import supported consump� on boom which is not sustainable. The authori� es and the private sector should fi nd out produc� ve avenues for remi� ances. Third, the government and the donors should con� nue to adhere to the recently unfolding grant-dominant aid strategy. At the same � me, given a very comfortable debt servicing burden and a very poor current status of harnessing abundant natural resources, Nepal should not shy away from external borrowing. But this 10 Changing paradigms of aid eff ec� veness in Nepal
Page 2: Changing Paradigms Of Aid Effective
Page 5 and 6: Changing Paradigms of Aid Eff ec�
Page 8 and 9: Acknowledgement Six decades of ‘p
Page 10 and 11: Acronyms: AAA Accra Agenda for Ac
Page 12: ODA Offi cial Development Assistanc
Page 16 and 17: Introduc� on: Effectiveness of Fo
Page 18 and 19: Buoyancy of revenue coincides with
Page 20 and 21: the en� re prospects for economic
Page 22 and 23: (NAP) on Aid Eff ec� veness both
Page 24 and 25: the IMF or the World Bank as these
Page 26 and 27: uilding na� onal capacity and par
Page 28 and 29: Tradi� onal global governance as
Page 30 and 31: ut their impact has been mixed. Com
Page 32 and 33: irregular unskilled daily wage labo
Page 34 and 35: cul� vators who live in complex,
Page 36: freedom and social jus� ce, imper
Page 39 and 40: divided by fi ve. It is done becaus
Page 41 and 42: Table 1.2 Foreign Aid in the Budget
Page 43 and 44: more than three-fi � h in the LIC
Page 45: Table 1.3: Foreign Aid and the Exte
Page 49 and 50: Table 3. Foreign Aid and the Na�
Page 51 and 52: 14 9 8 7 6 5 4 3 2 1 0 100 90 80 70
Page 53 and 54: can absorb a far higher level of de
Page 55 and 56: sources of foreign exchange earning
Page 57 and 58: to increase the magnitude of GNI fr
Page 59 and 60: Table 2.1 : An Interna� onal Comp
Page 61 and 62: is rela� vely higher in Nepal as
Page 63 and 64: accompanied by poor supervision of
Page 65 and 66: conspicuously discouraged investmen
Page 67 and 68: and, therefore, it is impera� ve
Page 69 and 70: (2) How to more eff ec� vely inte
Page 71 and 72: 34 and reduce growing extent of tra
Page 73 and 74: the process of industrial developme
Page 75 and 76: Appendix 2: Quan� ta� ve Target
Page 77 and 78: OAD/Nepal (2010). Report of the Off
Page 79 and 80: focusing on conserving and expandin
Page 81 and 82: 1998, the total disbursement from a
Page 83 and 84: Figure 3: Offi cial Aid 1990-2009 4
Page 85 and 86: poverty. In case of Nepal, access t
Page 87 and 88: 4 Challenge of Managing Aid in Evol
Page 89 and 90: theories themselves remain vague an
Page 91 and 92: thought no earlier development theo
Page 93 and 94: ‘Social Capital’ approach of de
Page 95 and 96: inging all the donors working in Ne
Page 97 and 98:
sustainable and self-reliant develo
Page 99 and 100:
community. This is where eff ec�
Page 101 and 102:
Challenges and Limits to Choice Fac
Page 103 and 104:
5 Foreign Aid Politics in Developin
Page 105 and 106:
targets, some donors will therefore
Page 107 and 108:
avoided. This adds another nuance t
Page 109 and 110:
ut the interna� onal community mu
Page 111 and 112:
6 A bo� om up aid eff ec� venes
Page 113 and 114:
with the overall purpose of se� n
Page 115 and 116:
deepening public par� cipa� on
Page 117 and 118:
off er a minimum denominator for sh
Page 119 and 120:
the actual implementa� on of deve
Page 121 and 122:
“� mely, accurate and accessibl
Page 123 and 124:
Minimum standards for crea� on of
Page 125 and 126:
Nepal Is obviously in a good posi
Page 127 and 128:
Ac� on (AAA). All development act
Page 129 and 130:
presented drawing heavily from the
Page 131 and 132:
Confi dence in Nepal’s procuremen
Page 133 and 134:
8 Aid Eff ec� veness and Gender R
Page 135 and 136:
used in planning and managing gener
Page 137 and 138:
excluded groups (b) examining the g
Page 139 and 140:
9 Governing Emissions Reduc� on:
Page 141 and 142:
organisa� ons to ins� tu� ona
Page 143 and 144:
and increasing GHG sinks (i.e. fore
Page 145 and 146:
“which necessarily engenders an u
Page 147 and 148:
Table 5.2 Breakdown of UNFCCC REDD+
Page 149 and 150:
Quan� ta� ve survey results Tab
Page 151 and 152:
10 Green governance: Development ai
Page 153 and 154:
fi nancial support in the forestry
Page 155 and 156:
The Table shows that community fore
Page 157 and 158:
Livelihood assets off ered by CFUGs
Page 159 and 160:
11 Foreign aid and Educa� on in N
Page 161 and 162:
countries to the poor ones help to
Page 163 and 164:
ilateral ODA from DAC members, comp
Page 165 and 166:
in terms of foreign aid infl ow is
Page 167 and 168:
Table 7.1: Public investment in edu
Page 169 and 170:
agencies in Nepal’s educa� on s
Page 171 and 172:
ecipient in giving and taking forei
Page 173 and 174:
who can be manipulated by any shrew
Page 175 and 176:
12 Does Food Assistance matter? The
Page 177 and 178:
These en� tlements are embedded i
Page 179 and 180:
them to climb out of chronic povert
Page 181 and 182:
assistance. While the bulk of food
Page 183 and 184:
classifi ed as being capable of mai
Page 185 and 186:
seasonal migra� on of men to Indi
Page 187 and 188:
Insurance-eff ects The study reveal
Page 189 and 190:
commodity prices, therefore decreas
Page 191 and 192:
poverty, but yet not helping them t
Page 193 and 194:
156 a situa� on, where people can
Page 195 and 196:
In: Progress in Human Geography 17
Page 197 and 198:
Figure 1: FAO Food Price Index (200
Page 199 and 200:
Figure 3: Retail price of wheat and
Page 201 and 202:
Way forward: Tackling rising food p
Page 203 and 204:
14 Food Insecurity in Nepal: A Pove
Page 205 and 206:
secure access to suffi cient amount
Page 207 and 208:
the distribu� on of this valuable
Page 209 and 210:
structural features, but the domina
Page 211 and 212:
top-down Geneva- and Paris-based mo
Page 213 and 214:
subsequent disbursements spread ove
Page 215 and 216:
is impossible, as pointed out in th
Page 217 and 218:
eason why posi� ve economic and t
Page 219 and 220:
The aid for land reform, as is evid
Page 221 and 222:
ADB’s proposal to strengthen the
Page 223 and 224:
Nepali Rupees in land transac� on
Page 225:
Sincere thanks to: Birkha B Pun is
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