Development Cooperation Policy-2019 aims to utilise foreign aid in infrastructure and areas that contribute to sustainable development.

The government spent a substantial amount of foreign aid in administrative activities in the fiscal year 2021-22, the Office of the Auditor General said.

In its 60th annual report released last week, the constitutional body revealed that the government spent as much as Rs25.56 billion on recurrent programmes though foreign aid is supposed to be spent in areas that help in capital formation.

The government spent the amount in administrative activities even though the country received less than a half of the targeted foreign aid in the last fiscal year.

The government had hoped for receiving Rs343.01 billion in foreign aid in the fiscal year 2021-22 but could only get Rs160.09 billion. The receipt was Rs21.32 billion less than that flowed in the previous fiscal, according to the auditing body’s report.

As Nepal’s public debt—both internal and external—has been growing rapidly in recent years, there are concerns over proper utilisation of foreign aid, particularly loans.

The Development Cooperation Policy-2019 states that foreign grants will be used in sectors directly contributing to environmental protection and climate change, sustainable development, rural infrastructure development and social sector development.

Likewise, modernisation and development of agriculture, health, education, drinking water, sanitation, poverty alleviation and human development will be given priority while mobilising grant assistance, it states.

The policy also says that concessional loans will be utilised in sectors such as physical infrastructure (hydropower, solar and renewable energy, roads and bridges, irrigation, airports, railways, dry ports and urban infrastructure development), agriculture and tourism infrastructure that contribute to high economic growth, areas contributing to skills development and jobs creation, and foreign currency earning by boosting exports.

“Measures necessary to ensure effective utilisation of foreign aid should be taken given that the government has limited capacity of foreign aid mobilisation and it is being utilised in recurrent activities,” the auditor general’s report states.

The report also pointed out cases of how foreign aid is being utilised in recurrent activities.

According to the report, foreign aid is not being used properly in activities under the Prime Minister Employment Programme.

Over the three years until the end of last fiscal year, as much as Rs13.02 billion was spent under the programme, the report said.

“But the amount has been spent on sanitising culvert, small projects such as school playgrounds, and building trails instead of projects that boost production and help capital formation,” it added.

The programme is being implemented at federal, provincial and local levels to provide minimum employment and ensure social security.

Under this programme, the government guarantees 100 days of employment. As many as 621,073 people got employment for an average of 45 days in the last three years, according to the report.

In July 2020, the government had received $120 million from the World Bank to implement the employment programme for four years with a focus on improving employment services and labour market outcomes, especially for youth.