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Foreign aid absorption capacity erodes

Compared to domestic resources, the government’s appetite for the foreign aid consumption has eroded in last six years, though it has been working on to bring all forms of aid under red book.

The government has been able to consume only 49 per cent of the grants and 24 per cent of the loans in the last fiscal year 2013-14, whereas a fiscal year ago in 2012-13, it had utilised 74 per cent grants and 36 per cent loans, according to the Finance Ministry. However, the government had targeted to spend Rs 69.54 billion grants and Rs 43.7 billion loans in the last fiscal year.

Foreign aid utilisation averaged 66.91 per cent for grants and 49.18 per cent for loans, according to the Mid-Term Review of the last fiscal year’s budget, spokesperson of the Finance Ministry Ram Sharan Pudasaini informed.

The development partners have been asking the government to either increase its appetite for foreign aid consumption or let them fund the resources outside the budget book.

The recently released Development Cooperation Policy has also asked the development partners to channel their resources through the budget.

On one hand the government has been asking development partners to channel their aid through budget, and on the other, it has not been able to spend, which will put the government into a difficult position.

The development partners have been blaming frequent transfers of project staff, delays in procurement of goods and services, lack of financial discipline and weak monitoring for lower utilisation of foreign aid.

Likewise, delay in awarding contracts and reimbursing foreign aid on time has also not only hit aid mobilisation to the maximum level but also made the project cost high due to time and cost overrun.