During a meeting with Prime Minister K P Oli and Finance Minister Bishnu Poudel on Thursday, visiting ADB president Takehiko Nakao said that it was essential to accelerate the pace of investment for reconstruction and other development programs in order to achieve its economic growth potential of 7 percent to 8 percent per annum in the medium term.
"Nepal's public capital spending has been low at an average of 3.5 percent of gross domestic product (GDP) over the last five years compared to the 8 percent to 12 percent required to fill the critical infrastructure gap within a decade," he said.
A large portion of ADB's currently-committed assistance of $1.75 billion -- equivalent to 6 percent of Nepal's GDP -- remains unspent.
The government and ADB should work together to speed up project implementation, including promoting timely and proactive decision-making by project implementing agencies, Nakao said.
Implementation of projects slowed further in 2015 due to the earthquake, aftershocks, and supply disruptions in southern border districts.
"Now that the situation has normalized, the government needs to step up efforts to make up for the delayed reconstruction, as well as build fundamental capacity for project planning, implementation, and monitoring," he added. In this regard, Nakao welcomed the recent establishment of the National Reconstruction Authority (NRA).
The Capacity Development Resource Center at the Nepal Administrative Staff College, established in late 2015 and supported by ADB's technical assistance, will be instrumental in providing regular and long-term training to staff at agencies implementing the projects and related government officials, he said while exchanging his views with the prime minister and finance minister on the need for a long-term socio-economic development strategy and medium-term development plan, the preparation of which the government had initiated recently.
"Enactment of the new constitution and launch of the United Nations' Sustainable Development Goals have provided an excellent opportunity to prepare a long-term vision and development strategy for Nepal. They will help the government deepen reforms, prioritize public investment, and spur private investment in all sector," Nakao said, adding that ADB would continue to provide technical assistance to support this planning process.
Nepal was a founding developing-member country of ADB and ADB started its lending operations here in 1969. ADB has approved 135 sovereign loans totaling $3.7 billion till date. It has also approved five non-sovereign loans, equity investment and guarantees totaling $49.5 million.
During the visit, Nakao said ADB was willing to expand annual lending to Nepal by 70 percent to $500 million per year from the current $300 million to support critical investments and reforms.
Under ADB's country partnership strategy with Nepal for 2013-2017, ADB is prioritizing major investment in hydropower generation and transmission, enhancing the capacity of international airports, building new economic corridors to promote regional trade, and reforming the higher education system.
ADB will continue its support for inclusive growth through investment in agricultural diversification and productivity, urban and rural water supply and sanitation, and rural roads. ADB will work to attract private sector investment and public-private partnerships for large-scale hydropower and transmission projects and high-value agricultural value chains.
Nakao, the prime minister and the finance minister also discussed Nepal's economic recovery and social development after the devastating earthquakes in 2015.
During the discussions, Nakao praised Nepal's enactment of its new constitution as a major milestone in its political transition process. "The new constitution marks a new era for Nepal and lays the foundation for lasting peace, stability, and more rapid socio-economic progress," he said, adding that he hoped the remaining political differences over the new constitution would be amicably resolved soon, paving the way for its timely implementation. "ADB is ready to provide assistance for Nepal's transition to a new governance structure and public management systems as envisaged in the constitution."
ADB forecasts that Nepal's economy will grow 1.5 percent in Fiscal Year 2015/16 -- down from last fiscal year's 3 percent growth -- hit by the 2015 earthquake and subsequent supply disruptions. ADB is expecting growth will pick up to 4.8 percent in Fiscal Year 2016/17.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by its 67 members -- 48 from the region.
Related story
ADB supports Nepal’s digital transformation toward high‑impact...
