Nepali govt removes minimum threshold for receiving foreign assistance

Nepali government has removed minimum threshold for most types of foreign assistance as the Himalayan country aims to receive maximum aid either in the form of grant or loan to spearhead its development activities.

Shreekrishna Nepal, chief of international cooperation coordination division at the Nepal’s Finance Ministry told Xinhua on Friday that the minimum threshold was removed as per the government’s aim of maximising finances.

The government is maximising finances to upgrade the country to developing country from least developed status at first and stated goal of transforming the country into middle income country by 2030.

“Instead of telling the donors ‘No’ to their small grant or loan, the policy aims to streamline small assistance into pool fund to use them into single large project,’’ Nepal said.

“Question also arises whether to accept aid of 4.5 million U.S. dollar if we keep threshold at five million U.S. dollar for grant,’’ said the official.

According to a new Development Cooperation Policy released by Nepal’s Finance Ministry earlier, minimum threshold set for receiving grant and commercial loan has been removed.

Such threshold has been maintained only for receiving concessional loan that Nepal has been receiving from multilateral development partners such as the World Bank and the Asian Development Bank.

The new Development Cooperation Policy which replaced the old one introduced in 2014 was released after the Nepal’s cabinet approved it.

As per the old policy, minimum threshold for receiving grant was fixed at 5 million U.S. dollar per project.

The new policy removed this threshold but it stated that the size of grant would be made larger as far as possible through other means.

“The donors will be encouraged to contribute small grant to a pool fund created after combining contribution from several donors,’’ the new policy states.

The Nepali government aims to spend grant in the areas of environment protection to tackle climate change, sustainable development efforts and rural infrastructure.

Others are; social development, agriculture modernisation, health, education, drinking water and human development.

The new policy has kept the threshold unchanged at 10 million U.S. dollar per project for the concessional loan, in which interest rate remains very low.

The concessional loans will be used in the areas of hydropower, renewable energy, road, bridge, irrigation, airport, railway, dry ports, urban infrastructure, agriculture and tourism infrastructure, the policy states.

The new policy also removed the threshold for other loans including commercial loans which was maintained at 20 million U.S. dollar per project in the earlier policy.

The Himalayan country, which has been receiving loans from foreign Export-Import Banks including such banks from both China and India sometime ago, has sought to use such loans in the areas of hydropower, highway, railway, airport, dry port and urban infrastructure projects.

The policy has, for the first time, opened the door for receiving foreign assistance under Engineering, Procurement, Construction and Financing (EPCF) modality where the developer of the project gets involved in all tasks including financing.

A number of Nepali private sector hydropower developers have signed agreements with Chinese companies to develop the projects under EPCF modality.