Countries and Regions

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p. 4 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Country Strategy and Program Update 2004-2006: Nepal

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IV. Country Performance and Assistance Levels

A. Lending Level Proposed

22. An indicative ADF lending level of $321 million is programmed for 2004–2006. This corresponds to an average of $107 million ADF lending per annum. However, the proposed ADF level is subject to the outcome of the annual performance-based allocation (PBA) exercise and overall ADF resource availability. The assessment of the country-specific monitoring indicators shall be the basis for triggering high, base, and low ADF lending scenarios each year. Depending on ADF resource availability in 2004, the ADF lending program will need to be reviewed. The issue will be revisited and confirmed during the Country Program Confirmation Mission. The 2005 and 2006 ADF lending program will depend on the outcome of the discussions regarding ADF replenishment.

23. The PBA’s country-specific monitoring indicators, agreed on with the Government, include (i) the preparation of a FY2004 budget, through clear prioritization and streamlining of development projects/programs; (ii) control of corruption, resulting from effective implementation of anticorruption measures; (iii) progress in improving performance-based management in selected key ministries; (iv) progress in agriculture, irrigation, power, education, and finance sector reforms; and (v) progress in portfolio management (Appendix 1, Table A1.12).

24. The overarching objective of ADB’s CSP is to achieve sustainable reduction in poverty, through a combination of accelerated broad-based economic growth, social development, and good governance. During 2004–2006, subject to the improved security situation, priority will be given to assisting the Government’s reconciliation, rehabilitation, and reconstruction efforts, through developing rural areas; improving basic social services and infrastructure; empowering women; enabling private sector development; and improving governance in the public, corporate, and financial sectors. When appropriate, programs and projects will also be designed to target neglected areas and excluded groups, to reduce poverty and inequality. The strategic approach of the program will continue to emphasize institutional strengthening.

25. The proposed 2004–2006 lending program consists of 14 firm projects, totaling $321 million (Appendix 1, Table A.1.10). The proposed program is consistent with the strategic thrust of the proposed CSP. Core poverty intervention projects constitute 93% of the total 2004–2006 program. Actual resource allocation will depend on performance, as measured by PBA common criteria, including portfolio performance and country-specific criteria. In support of the Government’s emerging need for reconciliation, rehabilitation, and reconstruction, the timing of the projects with greater potential to benefit rural communities and conflict-affected areas has been adjusted,¹⁰ and their proposed scope and geographical focus will be reviewed. Concept papers for lending products are in Appendix 2.

B. Nonlending Program

26. The nonlending program focuses on institutional strengthening and capacity building, which are needed to develop more effective sector institutions and project preparation. The 2004–2006 TA program includes 29 TAs, with a total value of $12 million (Appendix 1, Table A.1.11). The indicative planning figure (IPF) of the TA program is envisaged to average about $4 million annually and will be supported with cofinancing resources. While providing advisory TA activities remains consistent with the 1999 Country Operational Strategy, which stressed the critical importance of building effective institutions to maximize the development impacts of ADB assistance, there is a growing need to optimize the use of increasingly scarce TA funds. An economic and sector work program forms the basis for ADB’s support of policy reform, capacity building, and institutional strengthening in Nepal. Seven planned studies will provide guidelines for future ADB interventions in the agriculture, governance, civil aviation, and regional development sectors. Concept papers for nonlending products are in Appendix 3.

C. Summary of Changes to the Lending and Nonlending Program

27. The Ecotourism Project and the Second Rural Infrastructure Sector Development Project (deferred from the 2003 loan program, owing to the security problem) have been added to the 2004 loan program. The Subregional Roads Connection Project was dropped from the country IPF but has been reclassified as an SARD subregional cooperation project and included under that IPF. The Technical/ICT Education Project and the Private Sector Development Project have been renamed, respectively, the Skills for Employment Project and the Market Access and Productivity Growth for the Private Sector Project. The Community Livestock Development Project (formerly the Smallholder Livestock Development Project) has been advanced to the 2003 loan program. The Commercial Agriculture Development Project (formerly the Integrated Agriculture Development Project), which was deferred from 2003, has been added to the 2005 loan program. The Agribusiness Development Project and the Rural Electrification and Renewable Energy Project have been deferred to the 2006 loan program. Consistent with the Government’s priorities, the Community Groundwater Irrigation Sector Development II Project has been advanced from the 2006 program to the 2005 program.

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