Kathmandu [Nepal], August 20 – Nepal is entering a challenging phase as access to foreign grants and highly concessional loans continues to shrink, Finance Minister Dr. Swarnim Wagle said on Thursday.
Speaking at a meeting of the Public Accounts Committee, Wagle said highly concessional loans once available at interest rates of 1 to 1.5 percent with repayment periods of up to 40 years and eight-year grace periods are becoming increasingly difficult to secure.
“The window for highly concessional loans is now closing. The grants we are supposed to receive are also drying up,” Wagle said.
He said Nepal has relied on foreign assistance to finance expenditures not covered by domestic revenue since the country’s first budget. However, the share of foreign grants has declined as the economy and government budget have expanded.
The current fiscal year’s budget has projected around Rs 201.2 billion in foreign borrowing and Rs 62 billion in foreign grants. Wagle said actual grant receipts have repeatedly fallen below estimates with annual projections of Rs 48 billion to Rs 52 billion often resulting in only Rs 10 billion to Rs 15 billion in actual receipts.
He said rising interest rates shorter grace periods and repayment terms along with growing competition for concessional financing are making major infrastructure projects and institutional reforms harder to finance.
Wagle said Nepal must increasingly turn to private capital for large infrastructure projects as traditional foreign aid sources decline.
He said concessional financing from institutions such as the World Bank and Asian Development Bank remains important but access to such resources is gradually narrowing.
