Forum (Spotlight Weekly)

ADB's Assistance For 2004-2006

The Asian Development Bank's (ADB's) proposed US$321 million lending program for Nepal over 2004-2006 will be fully consistent with the Government's poverty reduction strategy as set out in its recently-approved Tenth Plan and will in particular address the needs of conflict-affected areas and disadvantaged groups.

This was announced today at the conclusion of ADB's annual Country Programming Mission here from 31 March to 10 April. The Mission consulted with the Government, private sector organizations, NGOs, and Nepal's other development partners to agree upon and prioritize proposed support over the period 2004-2006.

As agreed with the Government, ADB's proposed lending program for 2004-2006, which is subject to the approval of ADB's Board of Directors, comprises 14 loans for projects supporting agriculture, rural infrastructure development, rural electrification and alternative energy, rural access road network, water supply and sanitation, empowerment of women, and ecotourism.

The proposed program includes a technical assistance (TA) program consisting of 32 TAs totaling on average $4 million per annum. This grant-financed TA program will largely focus on assisting the Government with project preparation, capacity building of Nepal's key institutions, and key sector reviews.

The total of $321 million from ADB's concessional Asian Development Fund (ADF) corresponds to a yearly average of $107 million. However, the level of future ADB lending will depend upon country performance against a set of criteria in the areas of macroeconomic management, sector policy reforms, and utilization of existing assistance as per ADB's Performance Based Allocation Policy.

Nepal continues to face formidable political and economic difficulties. ADB greatly welcomes the recent ceasefire and hopes that this will lead to meaningful negotiations and a lasting peace. This is a necessary condition for economic recovery and will also provide an environment for renewed and strengthened development efforts to address widespread poverty, the country's key social and economic challenge. The Government has made clear that enhanced development of remote areas and tackling the problems of social exclusion are key priorities.

ADB shares these concerns and will seek to support the Government and the concerned communities to achieve these objectives. At the same time, both the Government and ADB recognize the importance of building a solid foundation for broad-based pro-poor growth without which a sustainable reduction in poverty reduction is not possible. Support for key social and economic infrastructure and policy reform will thus remain a key element of ADB's program for Nepal.

In the short-term, rehabilitation and reconstruction is a clear priority. ADB is already actively discussing with the Government and other development partners on how best to address this. ADB's support for rehabilitation and reconstruction is likely to come mainly through the use of loan savings under the existing portfolio of ADB-supported projects.

ADB welcomes the efforts made by the Government since last year's Nepal Development Forum, held in 4-7 February 2002, to address the chronic problem of poor program and project implementation. During this period, efforts have begun, in particular, under the Immediate Action Plan approved last year, to improve service delivery. Equally, there has been notable progress in other areas of governance, including expenditure management and prioritization and in the area of anticorruption. While encouraged by these efforts, much more remains to be done.

ADB's proposed package of assistance will be reflected in the Country Strategy and Program Update (CSPU) for Nepal, which is expected to be considered by ADB's Board of Directors in August 2003.