EXPERT SPEAKS: Impacts of foreign aid received by Nepal

ShareSansar June 28: Nepal received $4.4 billion in aid from development partners and donor community during the International Conference on Nepal’s Reconstruction-2015. What will be its impact? Mr. Nara Bahadur Thapa Executive Director, Public Debt Management Department, Nepal Rastra Bank There can be both positive and negative impact of such huge aid received by Nepal. Looking at the positive impacts we can say: The aid received from development partners and donor communities would boost the confidence of the Nepalese people the government of Nepal. The sector affected by the earthquake will receive the aid. The donors will have the government to look at various affected sectors for the utilization of the aid and as a result there will be diversification in investment done by the government. Rural areas will be kept as a prioritized sector. As donors are insisting for resettlement of the 14 affected districts, the government will be paying attention towards the rural areas and as a result development of those areas will take place which government would not have prioritized otherwise. The aid received in such huge amount will help in the reconstruction of the cultural and historical heritages destroyed by the earthquake. The cultural and historical heritages destroyed by the earthquake will be reconstructed by using modern techniques. The look of the structures will be old but the construction techniques will be modern. As donors are involved from all over the world definitely the new technologies will be entering in the country.  Also, China had shown commitment of constructing two transit points, which after the establishment will be very beneficial for the country. Overall, it will help in modernization of Nepal’s Economy. It will provide momentum to various modernization projects like fast track and others. Foreign money which is needed for the reconstruction of Nepal will be available and it will also help in external stability. For the next five years the government will not have problem of the external resources. There can also be negative affects too.  As in: Government can become lethargic thinking that we don’t need to do anything now. The government might not pay attention in mobilization of the internal resources like tax refund, etc., excess liquidity also won’t be utilized in the best possible way in the economy. Lack of management of excess liquidity and remittance that is coming in our country in huge quantities will create problem in our economy. If low interest rates prevails in the market than there is also a chance of capital fight. It can become a reason of instability in the banks and other financial institutions.