The foreign aid commitment in fiscal year 2006/07 increased by 76.9 percent against a decline of 45.2 percent in fiscal year 2005/06. In fiscal year 2006/07, committed foreign assistance amounted to Rs. 37.02 billion, as compared to an amount of Rs. 20.92 billion in fiscal year 2005/06.
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Of the total foreign aid commitment, the bilateral assistance constituted Rs. 17.71 billion, whereas the multilateral assistance was equivalent to Rs. 19.32 billion. While classifying the foreign aid into grants and loans component for fiscal year 2006/07, foreign grants amounted to Rs. 30.86 billion and foreign loans amounted to Rs. 6.16 billion in fiscal year 2005/06 as compared to the previous year, the foreign grants had increased by 69 percent and the foreign loans had increased by 131.7 percent respectively. |
While analyzing the foreign aid commitment in fiscal year 2006/07 on a sectoral basis, the share of foreign aid commitment for agriculture, irrigation and forestry was 3.9 percent, electricity 4.7 percent, local development 5.3 percent, education 16.9 percent, health sector 9.2 percent, and other 45.9 percent. Similarly, the share of foreign aid commitment for the transport and communication sector was 14.1 percent.
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Foreign Aid Commitments
In the first eight month of fiscal year 2007/08, the foreign aid commitment increased by 89.1 percent to Rs. 48.67 billion. Of the total foreign aid commitment, the committed foreign grants amounted to Rs. 40.55 billion (83.3 percent of the total) and the committed foreign loans Rs. 8.12 billion (16.7 percent of the total). In the first eight months of fiscal year 2006/07, the committed foreign aid amounted to Rs. 25.74 billion. Commitment of Foreign Aid Disbursement of Foreign Aid of which foreign grants was Rs. 19.57 billion and foreign loans Rs. 6.16 billion. Of the total commitment, the composition of grants and loans was 76.1 percent and 23.9 percent respectively.
Commitment and Disbursement
In the first eight months of fiscal year 2007/08, the share of bilateral assistance in total commitment was 26.9 percent while the share of multilateral assistance was 73.1 percent. In the same period last year, the shares of bilateral and multilateral assistance were 40.2 percent and 59.8 percent respectively. While analyzing sectorwise, the foreign aid commitment in the first eight months of fiscal year 2007/08 for electricity sector was Rs. 2.72 billion (5.6 percent), education sector 3.78 billion (7.8 percent), local development Rs. 6.72 billion (13.8 percent), agriculture, irrigation and forestry 4.34 billion (8.9 percent), transport and communication Rs. 3.35 billion (6.9 percent) and other sectors Rs. 27.76 billion (57 percent).
Commitment and Disbursement of Foreign Aid
In fiscal year 2006/07 compared to that of fiscal year 2005/06, the disbursement of foreign aid increased by 17.3 percent to Rs. 25.85 billion. Of the total foreign aid disbursement in fiscal year 2006/07, Rs. 15.80 billion (61.1 percent) was foreign grants and Rs. 10.05 billion (38.9 percent) foreign loans. In the previous year, the foreign aid disbursement amounted to Rs. 22.04 billion, of which Rs. 13.83 billion (62.7 percent) was foreign grants and Rs. 8.21 billion (37.3 percent) foreign loan. Of the total foreign aids disbursement in fiscal year 2006/07, Rs. 9.44 billion (36.5 percent) was through multilateral assistance and Rs. 16.41 billion (63.5 percent) through bilateral assistance In the previous year, the multilateral aid disbursement had amounted to Rs. 14.38 billion (65.3 percent) and bilateral assistance Rs. 7.66 billion (34.7 percent).
The foreign aid disbursement on a sectoral basis in fiscal year 2006/07 shows that, foreign aid disbursement in social sector was Rs. 15.18 billion (58.7 percent of the total), transport, electricity and communication sector Rs. 6.06 billion (25.8 percent), agriculture, irrigation and forestry Rs. 3.72 billion (14.4 percent), industry and commerce Rs. 116.8 billion (0.5 percent) and others Rs. 173.1 million (0.7 percent). On comparison of the foreign aid disbursement on a sectoral basis for fiscal year 2006/07 with that of fiscal year 2005/06, the foreign aid disbursement in social sector increased by 3.6 percent, agriculture, irrigation and forestry by 55.3 percent and industry and commerce by 10.9 percent, while the disbursement in transport, electricity and communication sector decreased by 5.9 percent.
Foreign Loan
Foreign loan has played a crucial role in the Nepalese economy, mainly due to inadequate revenue mobilization to meet the expenditure. The net outstanding foreign loan compared to the level of Rs. 233.96 billion in fiscal year 2005/06 decreased by 7.4 percent to Rs. 216.63 billion in fiscal year 2006/07. 2.30 net outstanding foreign debt at the end of first eight months of fiscal year 2007/08 (adjusting gross borrowing and principal repayment in the fist eight months) decreased by 7.9 percent to Rs. 216.20 billion compared to the net outstanding foreign debt of Rs. 234.81 billion at the end of the first eight months of fiscal year 2006/07.
The ratio of net outstanding debt to GDP at producers’ price reduced to 29.8 percent in fiscal year 2006/07, from 35.8 percent in fiscal year 2005/06 and 37.3 percent in fiscal year 2004/05. The net outstanding debt to GDP ratio further reduced to 26.3 percent during the first eight months of fiscal year 2007/08.
Domestic Borrowing
Outstanding domestic debt increased by 9.6 percent to Rs. 103.78 billion in mid-July 2007 from the level of Rs. 94.71 billion in mid-July 2006. Of the total outstanding debt in mid-July 2007, Nepal Rastra Bank held Rs. 15.63 billion (15.1 percent), commercial banks held Rs. 65.84 billion (63.4 percent) and other non-bank institutions and private sector held Rs. 22.31 billion (21.5 percent). On analyzing domestic borrowing by instruments, 71.7 percent was Treasury Bills, 18.5 percent development bonds, 1.5 percent National Savings Certificate, 1.3 percent Citizen Savings Certificates and 7.0 percent special bonds.
In the first eight months of fiscal year 2007/08, outstanding domestic debt increased by 5.2 percent. The outstanding domestic debt increased to Rs. 107.66 billion during the same period in fiscal year 2007/08 from the level of Rs. 102.39 billion at the end of the first eight months of fiscal year 2006/07. Of the total outstanding debt at the end of the first eight months of fiscal year 2007/08, Nepal Rastra Bank held 23.7 percent; commercial banks held 55.5 percent and other non-bank institutions and private sector held 20.8 percent. When analyzing domestic borrowing by instruments, Treasury Bills amounted to Rs. 80.44 billion (74.7 percent), development bonds Rs. 18.07 billion (16.8 percent), National Savings Certificates Rs. 3.52 billion (3.4 percent), Citizen Savings Certificates Rs. 1.87 billion (1.7 percent), and special bonds Rs. 5.77 billion (5.4 percent). The outstanding domestic debt in the form of development bond decreased by 5.8 percent, National Savings Certificate by 60.9 percent and special bonds by 28.1 percent in the first eight months of fiscal year 2007/08 compared to the level of the same period in fiscal year 2006/07. In the first eight months of fiscal year 2007/08 compared to the same period of fiscal year 2006/07, the domestic debt in the form of treasury bills increased by 15.4 percent and the Citizen Savings Certificates by 16.8 percent. The outstanding domestic debt to GDP ration remained at 14.5 percent in fiscal year 2005/06, 14.3 percent in fiscal year 2006/07 and 13.1 percent at the end of first eight months in fiscal year 2007/08.
Fiscal Deficit
As a result of smaller revenue and foreign grants as compared to the level of expenditure, the fiscal deficit increased to Rs. 30.09 billion in fiscal year 2006/07 from Rs. 24.78 billion in fiscal year 2005/06. The fiscal deficit that was in a decreasing trend since 2000/01 showed an increasing trend since fiscal year 2004/05. The fiscal deficit to GDP ration, which was at 3.8 percent in fiscal year 2005/06, increased by 0.3 percentage point to reach 4.1 percent in fiscal year 2006/07.
