JAN 26, 2012 KATHMANDU – Corruption, irregularities in judicial system and development works are hindered due to political instability in Nepal makes its progress as low as its foreign aid are not even reaching to the stream of annual budget too.
A significant portion of the foreign aid does not flow through the government systems, according to the 2011 Survey on Monitoring the Paris Declaration, Nepal Country Report. The report says only 58 percent of the foreign aid figures in the country’s annual budget.
The Paris Declaration seeks to give more ownership to the recipient country in aid management and alignment of priorities with the government to increase aid effectiveness.
Although the Organisation of Economic Cooperation and Development (OECD), an organisation of major donor countries, has targeted to increase the portion of aid flowing through the recipient country’s budget to 85 percent, the target is yet to be realised in Nepal.
According to the report, donors usually do not report the channelling of their aid through non-government organisations, their technical assistance, scholarships and debt-relief funds. This creates discrepancy in donors’ report on aid disbursement and the Nepal government’s figures.
Other OECD’s targets on aid effectiveness have also been not realised in Nepal despite the country’s progress in several indicators, according to the report. The country has witnessed some improvements in indicators including coordinated technical assistance, parallel project implementation units, in-year aid predictability, programme-based approaches, joint missions and joint country analytical work.
There have also been declines in some indicators such as using the country public financial management system and country procurement system.
However, Tilakman Rajbhandari, former under-secretary at the Finance Ministry, who worked as national coordinator for the survey, said the decline in some in indicators should not be considered bad. “Nepal’s progress is encouraging compared to the global standards,” he said.
According to the report, donors are hesitating to use Nepal’s procurement system, citing slow budget release process, cumbersome procurement system and weakness in financial reporting and auditing procedures. “Donors’ distrust on the national procurement system is the reason behind their unwillingness to use the system,” states the survey.
Nepal has made significant improvement in avoiding parallel implementation structure, reducing such units to 68 from 106 in 2008. The USAID has the largest number (18) of independent implementing units, while multilateral donors do not have any. “There are strong evidences that such parallel units tend to undermine the national capacity building efforts and confuse accountability for development,” states the survey.
The main objective of the aid predictability is to ensure that the assistance is disbursed according to the agreed schedule and recorded in the country’s accounting system. “Accurate reporting of all disbursement will help reduce the gap seen this context,” says the report.
According to the survey, most of the aid is now untied and without tougher conditions. Donors have also increasingly come through programme-based approaches and working together themselves to help Nepal. Various joint mechanisms such as Joint Financing Arrangement, code of conduct, joint annual reviews and are developed by donors, says the report.
Key Findings
Results Results OECD
Indicators 2008 2011 Target (2010)
Aid on budget 46% 58% 85%
Coordinated tech. aid 15% 48% 50%
Use of Country PFMS 68% 63% 76%
Use of country procurement 56% 35% N/A
System
Parallel implementation units 106 68 64
In-Year aid predictability 47% 55% 65%
Programme based modality 23% 31% 66%
Joint Missions 23% 33% 40%
Joint Country analysis 28% 63% 66%
