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poverty. In case of Nepal, access to aid has not been a problem. The key
obstacle to address people’s expecta� ons for be� er life through aid-oriented
priority projects lies in the inability to u� lize aid.
About Rs. 48 billion foreign aid was commi� ed to Nepal by development
partners during the FY 2008/09. By July 9, 2010, Nepal has received Rs. 97
billion foreign aid commitment. In rela� on to the encouragement received
by increasing aid commitment, as stated above aid, u� liza� on has been
minimal (MOF, Budget Speech, 2010).
There are tons of money in wasteful and ineff ec� ve economic
development aid and other nonessen� al accounts. Since World War II the
United States has spent nearly $1 trillion (in 1997 dollars) on foreign aid.
The impact remained discouraging. Countries that received assistance
experienced debt, dependency and poverty. USAID admits, in 1993, much
of the investment fi nanced by it and other donors between 1960 and 1980
has disappeared without a trace and government-to-government transfers
could not generate self-sustaining economic growth. Not only this, over
US$2 billion investments in Zaire served no purpose (Bandow 1997).
Conclusions
Nepal’s foreign aid policy (FAP) is undergoing a major overhaul, since
the fi rst FAP, 2002 was promulgated. The revised version appeared in 2008
and again in 2009 for policy endorsement by successive Nepal Development
Forums. Despite these eff orts, review shows Nepal s� ll needs to bring about
comprehensive reform programs to address changed global environment
to compe� � ve lending procedure and Nepal’s proposed model for fi scal
decentraliza� on under the federalist characteris� cs. Nepal’s current policy
has failed to use the resources produc� vely and maximize the benefi ts
especially for the deprived groups of people. Overemphasis of poli� cal
restructuring at the cost of economic restructuring by country’s poli� cal
process is inexcusable with regards to strengthening aid u� liza� on capacity.
At a policy level, as long as foreign aid is not designed to integrate with
priority developmental ac� vi� es, periodic assessment of the impact of
foreign assistance will always be marginalized. This has created a huge gap
in collec� ng informa� on on the impact of aid in infl a� on, exchange rate and
other cri� cal indicators so necessary for public expenditure management
and the formula� on of appropriate fi scal and monetary policy to contain
infl a� on. The � me therefore, has come to develop domes� c aid policy
compa� ble with country’s priori� es and harmonize it with the New Approach
to Development endorsed by G8 Summit.
REFERENCES
Bandow, Doug. Foreign Aid Costs US More and Gains US Less. Washington, D.C: Cato
Ins� tute, 1997.
Berg, Elliot (ed.). Policy Reform & Equity, Extending the Benefi ts of Development.
San Francisco:
Interna� onal Center for Economic Growth, 1988.
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Changing paradigms of aid eff ec� veness in Nepal