The
Looming Trap
OVER the decades, Nepal
has been receiving more and more foreign aid to finance its development efforts. It is
quite clear that Nepal hasn't had any problem in attracting foreign aid, especially since
the restoration of democracy in 1990. Decades of foreign aid notwithstanding, it is now
however felt widely that the country has not been able to fight poverty to an appreciable
degree. Proper utilisation of foreign aid, thus, has become more and more a matter of
urgency. Donors to Nepal have in recent years spoken more and more stridently about the
need for maximum utilization of foreign aid. The Tenth Five Year Plan (2059-2063) places a
lot of emphasis on reducing the poverty by maximising the utilisation of foreign loans and
grants. The target is to achieve a reduction in poverty prevalence to 30 per cent,
attaining a 6.2 per cent economic growth. Though achievement of such targets hinge on very
many factors, including that related to good governance, it is incontestable that maximum
utilisation of foreign aid is a prominent concern.
This assumes all the
more significance when viewed against the fact that the country is practically bent with a
heavy load of foreign loan. Speakers at a function the other day sounded dire warnings
that the country could fall into a debt trap as witnessed by a number of developing
countries currently. Their concern stems from the fact that as most of the loans received
by Nepal from various multilateral agencies over the past decades are going to mature in
the next couple of years, the country is in for a frightening payback scenario where its
resources will simply not match the need for paying off the debts maturing one by one.
Thus knowledgeable economists' suggestion that the government take sound measures before
the country falls into a hopeless debt trap, must be taken seriously. While the
government's intention to put in place expenditure tracking for effective utilisation of
resources, including foreign aid, is welcome, it has to at the same time begin addressing
the issue of paying back debts. Nepal's reputation among international creditors as one of
the good performers in servicing the debt may not be of much help when it's time to pay
back the long-term debts. There have been examples of many developing countries succeeding
in securing write-offs. Nepal should also lobby hard internationally in the coming time to
obtain debt write-offs at least partially so that Nepalese are unburdened of this heavy
load to some extent.
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