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1998, the total disbursement from all external sources to basic social
services amounted to US$ 59.4 million. Similarly, the disbursement in the
educa� on sector amounted to US$ 27.8 million, represen� ng 6 percent
of the total disbursement. The educa� on sector suff ered a decline of 37.3
percent in 1998 as compared to 1997. Although before 2002 the infl ow of
aid did not show proper matching with the need and priority of the na� on,
the situa� on has improved a� er that period. The main reason behind that
is the implementa� on of foreign aid policy and tenth plan based on poverty
reduc� on strategy paper. If we take development expenditure as a measuring
rod for judging priori� za� on of the sectors, then es� mated development
expenditure during the fi rst MTEF period (2002/3-2004/05) is highest for
energy sector (23,164 million) followed by agriculture, forestry and fi sheries
(19268 million) and transport (13189 million). The aid received by Nepal
during 1998-2005, as men� oned above, also follows the same order. This
is the indica� on of donor group's consistency with priority of the country
(Pyakuryal, Adhikari and Dhakal 2008).
There is no doubt that foreign aid has contributed to the development
of Nepal. In his study, (Bha� arai Spring 2009) found that aid is posi� vely
related to per capital real GDP in the long run. He also concludes that aid
eff ec� veness increases with the increase in good policy environment in the
long run. Therefore, the crucial issue here is not whether foreign aid has
contributed to GDP and development of Nepal; rather the issue is whether
foreign aid has been eff ec� vely used? Has it been able to channelize most
produc� ve sectors so that development ac� vi� es can be accelerated? Is
there scope of improving alloca� ve effi ciency of foreign aid?
External assistance is not value free. The aid targeted for developmental
projects is o� en alleged to have been directed towards the poli� cal and
strategic interests. However, if the key objec� ve of ODA is to promote
development, it should have a measure to link aid to the priori� es of the
recipient countries. Therefore, managing foreign assistance has usually
been quite poor to access aid to needy countries in general and targeted
benefi ciaries in the recipient countries in par� cular.
Contribu� on of Foreign Assistance to Development Goals
The cri� cism that aid has actually done more harm than good to
development goals of the poor countries is drawing a� en� on of majority of
aid prac� � oners. Professor Easterly (2006) is of the view that foreign aid has
not achieved much to achieving development goals. He states, “A tragedy
of the world’s poor has been that the West spent $2.3 trillion on foreign
aid over the last fi ve decades and s� ll had not managed to get twelve-cent
medicines to children to prevent half of malaria deaths. The West spent $2.3
trillion and s� ll had not managed to get four-dollar bed nets to poor families.
The West spent $2.3 trillion and s� ll had not managed to get three dollars to
each new mother to prevent fi ve million deaths”. It indicates a tragedy that
so much well-meaning compassion did not bring expected results for needy
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Changing paradigms of aid eff ec� veness in Nepal