India cuts 40 percent annual aid to Nepal

Kathmandu, Mar.2 (ANI): India reduced the its financial aid to Nepal by 40 percent on its general budget for the fiscal year 2016-17 and allocated Rs 4.8 billion (IRs3 billion) against Rs6.4 billion (IRs4.2 billion) compared to previous year.

The reduction comes days after Nepal Prime Minister K.P. Sharma Oli’s visit to India.

According to reports, the reduction in assistance has nothing to do with India’s low confidence in the Oli-led government.

For years, donors complained that poor development expenditure by the government has led to slow disbursement of foreign aid in Nepal and the Indian budget manifested the fact.

Chief economic adviser at the Finance Ministry, Govind Nepal said there was no need to read too much on Indian aid cut to Nepal, linking it to soured bilateral relations following the promulgation of the constitution.

India has reduced its aid allocation Nepal along with other South Asian nations excluding Maldives.

The Kathmandu Post quoted Nepal saying, “The situation worsened this year due to supply constraints caused by the blockade.Reconstruction of damaged infrastructure by the earthquake will begin soon, which will increase overall spending.”

Nepal’s former finance secretary, Rameshore Khanal however said that India itself was responsible for the poor performance of most of the projects undertaken with its aid because the southern neighbour was responsible for procurement and awarding of contracts.

On January last year, the meeting on the utilisationof Indian aid was held in New Delhi, where it was agreed that many procedural steps for loan utilisation will be eliminated following Nepal’s complaints.

According to Nepal, both the nations agreed to create a provision allowing them to utilise the credit by just informing Indian authorities.

Nepal hasn’t yet decided on where half of $1 billion line of credit given by India would be used while projects of only half the amount has been finalised.

The USD 1 billion line of credit was announced by Indian Prime Minister Narendra Modi during his visit to the Himalayan nation in August 2014.

Similarly no project has been finalised for additional $1 billion that was announced by Indian Foreign Minister Sushma Swaraj during the International Conference on Nepal’s Reconstruction (ICNR) on June 25 last year.

The Asian Development Bank, one of the largest donors to the Himalayan nation said that Nepal’s overall portfolio performance was behind the ADB average.

Indian finance ministry’s mid-term review report of budget of this fiscal year also depicted poor expenditure pattern of foreign aid.

Of the total Rs110.92 billion of allocated budget under foreign grant, only Rs5.9 billion (5.32 percent) was spent during the first half of the current fiscal year.

Similarly, of the total allocation of Rs94.96 billion under the foreign loan heading, only Rs2.91 billion (3.07 percent) was spent.(ANI)

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