KATHMANDU, Aug 20: Nepal’s foreign aid system has come under renewed scrutiny, with the House of Representatives’ Public Accounts Committee (PAC) directing the government to tighten the management, accounting and monitoring of external assistance.
The PAC has issued a nine-point directive aimed at ensuring that foreign aid is aligned with national priorities, properly recorded and ultimately produces measurable results.
At the heart of the committee’s concerns is the growing volume of aid being channelled outside the government’s budget and treasury systems. The PAC has directed the government to bring all forms of foreign assistance—including cash, in-kind support and technical assistance—into the national budget system wherever possible and subject them to mandatory auditing.
The committee has also asked the government to obtain complete details from development partners about aid being provided outside the budget system, commonly known as “off-treasury” aid. It has called for clear policies and procedures to bring such assistance into the national system.
52% of country's foreign aid went to province 3
The PAC further directed the government not to include foreign aid in the national budget until its receipt has been confirmed. It also called for the reimbursement process to be streamlined, noting that delays in reimbursements for externally funded expenditure can place additional pressure on the government’s own resources.
To address gaps in reporting, the committee has called for all foreign assistance to be recorded through a single system. It directed the government to maintain an integrated record of aid commitments, actual receipts, expenditure, utilisation and reimbursements.
The PAC also directed that all foreign assistance be registered in the Development Finance Information Management System (DFIMS) before the approval of projects. The move is intended to give the government a clearer picture of how much aid has been pledged, received and spent.
Beyond accounting, the committee raised concerns about whether Nepal has the institutional capacity to implement aid-funded projects effectively. It called for stronger project management and monitoring to prevent projects from falling behind schedule while their costs continue to rise.
The PAC also stressed the need to make public procurement, auditing and national treasury management more transparent and effective.
Another area of concern is the growing reliance on foreign consultants. The committee directed the government to assess the costs and benefits of consultancy services and seek foreign consultants only when they bring new technology, specialised technical expertise, or meaningful transfers of skills and knowledge.
The nine-point directive reflects a broader concern that the effectiveness of foreign aid should not be measured simply by how much assistance Nepal receives, but by how transparently it is managed and what it ultimately delivers.
By bringing aid closer to the national budget, treasury and audit systems, the PAC seeks to strengthen accountability while improving both donor confidence and the government’s capacity to turn external assistance into tangible development outcomes.
