KATHMANDU, March 30: Nepal has achieved significant improvement in its inflow of overall Official Development Assistance (ODA). However, it has witnessed a notable decline in the inclusion of ODA in the country’s capital expenditure within the budgetary system.
The Development Cooperation Report 2024-25, unveiled by the International Economic Relations Division of the Ministry of Finance (MoF), shows that Nepal received ODA worth US $1.60 billion in the last fiscal year (FY). This amount was 15.5 percent more than what was received under the same heading in the previous fiscal year.
On the other hand, the share of development assistance in the national budget declined to 14.5 percent, which is the lowest level in the past decade. According to a high-level official at the MoF, the increased mobilization of internal resources has led to this declining trend of ODA in the budgetary system.
New Foreign Aid Policy
In FY 2024/25, the government received a total of $1.98 billion in development assistance commitments through 33 agreements with 12 development partners. Out of this total, 79.1 percent ($1.57 billion) is in loans, and 20.9 percent ($413.1 million) is in grants.
Foreign loans have become the main source of funding for the country’s development budget. Of the total development assistance distributed, the country received 66.9 percent ($1.07 billion) in loans, 21.4 percent ($344.4 million) in grants, and 11.6 percent ($187.2 million) in technical assistance.
Among multilateral partners, the World Bank has been the largest donor, providing $541 million. It is followed by the Asian Development Bank ($443.2 million), the International Monetary Fund ($41.8 million), the European Union ($37.7 million), and the Green Climate Fund ($15.8 million). A total of $64.5 million was mobilized through the United Nations system.
India, providing $107.8 million, was the largest donor among the bilateral partners. India was followed by the UK ($84.2 million), the USA ($67.1 million), Japan ($58.3 million), Switzerland ($30.1 million), and Norway ($26.6 million).
In terms of the disbursement of total development assistance, multilateral partners accounted for 68.1 percent ($1.09 billion), bilateral partners accounted for 27.9 percent ($448.4 million), and the UN system accounted for 4 percent ($64.5 million). The top ten partners alone accounted for about 92.3 percent of the total disbursements.
Development assistance channeled through the budgetary system declined to $13.7 billion. Sectorwise, Nepal mobilized the largest amount, $252.8 million (15.7 percent), in transport. This was followed by $184 million in education, $170.3 million in civil security, and $204.5 million in other economic sectors.
Likewise, the coordination of foreign assistance with the budget system was found to have improved during the review period. On-budget disbursements increased by 23.5 percent to $1.36 billion, while on-treasury disbursements increased by 63.3 percent to $847.5 million. Off-budget assistance, on the other hand, declined by 15.1 percent to $242 million.
