Kathmandu, Sept 29: Foreign aid commitments to Nepal fell sharply to Rs 161.46 billion in fiscal year 2025/26 from Rs 273 billion a year earlier, as weak government spending capacity and greater mobilisation of domestic resources reduced external financing, according to the Ministry of Finance.
Concessional loans dominated the commitments, accounting for Rs 124.33 billion, or 77 per cent of the total. Grants stood at Rs 37.13 billion, or 23 per cent, showing Nepal’s continued reliance on loans for externally financed development.
Roads and physical infrastructure received the largest share at 24.6 per cent, followed by public financial management at 19.2 per cent. Drinking water and sanitation accounted for 10.8 per cent, climate and environment 10 per cent, energy 8.8 per cent and digital transformation 8.2 per cent. The remainder went to urban development, trade facilitation, education, health and other sectors.
Multilateral agencies provided 63.6 per cent of total commitments, against 36.4 per cent from bilateral partners. The Asian Development Bank accounted for the largest share at 28.2 per cent, closely followed by the World Bank at 27.2 per cent.
Foreign assistance has also steadily lost its weight in Nepal’s public finances. The Finance Ministry said its share fell from an annual average of 33.4 per cent during the Eighth Five Year Plan to 12.7 per cent during the 15th Plan.
Foreign aid utilisation as a share of total government expenditure similarly dropped from 30.7 per cent to 12 per cent over the same period.
Former National Planning Commission vice chairman Dr Prakash Kumar Shrestha said weak spending capacity was also behind the decline. Nepal continues to seek external financing because domestic revenue remains insufficient to meet development needs, but slow project implementation limits its ability to use available funds.
The Finance Ministry blamed weak project management, contractor delays and low capital expenditure for slowing foreign funded projects. Poor capital spending also reduced direct payments and reimbursements from development partners.
Nepal continues to seek grants and concessional loans for infrastructure and development projects. With government revenue struggling to cover recurrent expenditure, foreign financing remains an important source of funding for roads, energy, irrigation, drinking water, education and health.
People’s News Monitoring Service
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