Reconstruction loan delayed as India insists on selecting projects

Published On: January 21, 2018 07:32 AM NPT By: Sangeet Sangroula  | @SangeetJourno

KATHMANDU, Jan 21: Nepal has found itself in a difficult position, with India including a caveat in the use of a  soft loan amounting to around US$750 million pledged by New Delhi for post-earthquake reconstruction. 

Nepali officials said that they are expecting further delays in the already delayed release of over US$ 1,000 million in earthquake aid (loan included) due to disagreement over a selection of the reconstruction projects. 

Lately, Nepal and India have been involved in negotiations for expediting the release of the soft loan India has offered for post-quake reconstruction. An 11-member team of senior government officials from the National Reconstruction Authority (NRA) and line ministries recently visited the Export-Import Bank (Exim Bank) in India to familiarise themselves with the procedures for utilizing the Indian line of credit. 

However, India has been pressing Nepali authorities to allow it to select the projects on which the loan would be spent. The Nepali side has maintained that it should have full discretion over how the money is used. As a result, the  Indian loan has become complicated, say officials privy to ongoing negotiations.  

“As we have just three years left to complete the overall reconstruction task, we want to initiate a process for the release of the loan amount as soon as possible. But it has been very difficult to reach an agreement due to the Indian conditionality,” a highly-placed official seeking anonymity told Republica. 

The official said that the Indian side wants NRA to take prior consent from India in determining the projects on which the soft loan would be spent. Nepali officials have rejected this.  

“We have over 400 reconstruction projects that need to be carried out in a short span of time. How can we finish the projects on time if we are to wait for their approval for each and every project ?” the official added. 

The official also said that  NRA has made it clear to the Indian side that it was not possible to seek approval from them and that NRA will carry out reconstruction as needed.  

 According to sources,  NRA had already submitted detailed project reports for over 24 archeological sites and schools to the Indian side but they are yet to be approved even though the Exim Bank activated the LoC on February 24, 2017. During Prime Minister Sher Bahadur Deuba's visit to New Delhi in August, both sides had agreed to expedite the LoC. 

“However, little headway has been made. Due to their unnecessary demands, we have not been able to utilize a single penny from the pledged amount, let alone the grant of US$ 250 million,” another official said,  also seeking anonymity.

As India is yet to release the aid, NRA has been financing housing grants to 50,000 beneficiaries in Gorkha and Nuwakot from other sources. 

The donors pledging soft loans for post-quake reconstruction include India, Japan, the World Bank, Asian Development Bank, Saudi Arabia and the International Monetary Fund. 

Meanwhile, officials who have returned from the India visit said the bank is eager to release the amount as soon as possible and help begin the reconstruction work. 

Deputy Spokesperson of NRA Bhisma Bhusal said that  NRA and the bank have reached an understanding to begin reconstruction under the soft loan and kick off the reconstruction work from Harihar Bhawan in Patan.  

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