Nepal could lose funding, ADB warns
Asian Development Bank (ADB) today warned of cutting off the funds, if the government doesnot increase efficiency in spend on development projects.
Addressing Tripartite Portfolio Review Meeting – between ADB headquarter, Nepal Resident Mission and governmet – director general Hun Kim, here today warned that Nepal could lose potential resources from the ADB, if the performance of ADB-financed projects did not improve.
Nepal had not contracted a large portion of the portfolio equivalent to $1.09 billion 56 per cent), while as much as $1.42 billion (73 per cent) was still left to be disbursed as of June-end, of the total ADB portfolio of $1.95 billion, according to the ADB.
The ADB has approved contract awards of $242.8 million and disbursement projections of $210.6 million programmes assiated by it for 2015. However, by the end of June, contract awards had reached just $55.5 million (23 percent against the annual target) and disbursements amounted to $46.1 million (22 percent against the annual target). “It clearly shows poor absorption capacity,” Kim added.
The ADB allocates resources competitively based on the country’s portfolio performance,” Kim said, adding that Nepal needs the resource most for its development endeavour. “So, it is very important for us to improve the performance.”
The poor portfolio performance has been attributed to a lengthy procurement process, weak project management capacity and weak performance of consultants and contractors as always.
“All these have led to slow project implementation with low disbursement resulting in multiple loans and grant extensions,” he said, adding that Nepal’s portfolio has enough room for improvement.
The ADB has approved an Earthquake Emergency Assistance Project of $200 million to help the country in reconstruction, following the devastating earthquake on April 25 earthquake. The multilateral donor, is also providing $30 million under its budget support and $15 million under the Japan Fund for Poverty Reduction (JFPR), in addition.
The ADB is ready to provide further assistance to Nepal depending on country’s absorptive capacity. “A strong government leadership is needed to improve the country’s absorption capacity to address the enormous challenges for timely implementation of the Emergency Project which has to be completed by March-end 2019,” Kim added, urging early establishment of the National Reconstruction Authority. He also stressed the need for a clear working mechanism at the central level along with dedicated project implementation units at the project level for effective implementation of Earthquake Emergency Assistance Project.
Expressing serious concern for delays in the implementation of large ADB-funded infrastructure projects including Melamchi Water Supply, Tanahun Hydropower, upgradation of Tribhuvan International Airport, SASEC Roads Connectivity and transmission lines, the director general has asked for an in-depth diagnosis of problems, effective monitoring and review mechanism, strict application of the conditions of contracts and close monitoring of the performance and deliveries of contractors and consultants to improve the performance of these projects. “Non-performing contractors and consultants should be terminated without delay,” he added.
However, by the end of June, the contract award reached just $55.5 million (23 per cent against the annual target) and disbursement of $46.1 million (22 per cent against the annual target).
Defending delays, finance secretary Suman Sharma, on the occasion, attributed poor performance to the tremors that hit the country besides project implementation related problems.
The government has declared current fiscal year as Budget Implementation Year, Sharma said, adding that the government would now demonstrate its capacity.