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Nepal and ADB

ADB's country partnership strategy for Nepal considers development challenges in a federal system, the strategic objectives and priorities of the government, the activities of other development partners in the country, and the best use of the bank’s limited resources.

ADB's Work in Nepal

ADB Membership

Joined 1966

Shareholding and Voting Power

Number of shares held:
15,606 (0.147% of total shares)

Votes:
54,720 (0.411% of total membership, 0.632% of total regional membership)

Overall capital subscription:
$215.80 million

Paid-in capital subscription:
$10.80 million

Nepal has made notable economic and social progress in recent years: literacy rates have increased, poverty rates have declined, and gender disparities have narrowed. Nepal aims to achieve the Sustainable Development Goals by 2030. However, poverty is still high in rural areas and among socially disadvantaged groups.

Nepal was a founding member of ADB in 1966. The bank’s assistance has since been directed mainly to improvements in energy security, transport, water supply and urban infrastructure services, agriculture and irrigation, and education. Nepal moved to a federal system of governance after the promulgation of its constitution in 2015. The federalization process has devolved several functions to 7 provinces and 753 local governments.

Since 1966, ADB has committed about $6.00 billion in financial and technical assistance for Nepal.

Cumulative loan and grant disbursements to Nepal amount to $3.88 billion. These were financed by regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds.


ADB-Supported Projects and Programs

ADB’s new country partnership strategy, 2020–2024 for Nepal details support to help the country achieve a stronger and more inclusive economy. The strategy focuses on three priorities: improved infrastructure for private sector-led growth, improved access to devolved municipal and community services, and greater environmental sustainability and resilience. ADB is also supporting the Government of Nepal’s efforts in policy reform, institutional capacity building, gender equality and social inclusion, and climate change mitigation.

In 2019, ADB committed $358 million for four new projects. The signings included a $195 million loan to improve the highway between Pokhara and Mugling, a $50 million loan to increase the incomes of smallholder farmers across the country, a $50 million policy-based loan to support the government’s reforms in agriculture and food safety, and a $63 million loan as additional financing for improved flood management and river health in the polluted Bagmati River Basin.

A school boy drinks water from the community tap. ADB-supported initiatives helped provide 2.7 million people with access to clean water supply.

To build stronger human capital by expanding access to quality education, ADB is supporting the government’s School Sector Development Plan. The Earthquake Emergency Assistance Project ($193.06 million) has rebuilt schools, government buildings, and roads, while the Disaster Resilience of Schools Project ($158.86 million) is helping reconstruct school buildings heavily damaged by the devastating earthquake of 2015.

The Melamchi Water Supply Project has provided the longest tunnel (26 kilometers) in Nepal, which will eventually carry an additional 170 million liters of potable water every day from the Melamchi River to the Kathmandu Valley.

Satyanarayan Yadav, a banana farmer

The South Asia Subregional Economic Cooperation (SASEC) Highway Improvement Project ($180 million) is supporting improvements to Nepal’s East–West Highway, the country’s main domestic and international trade route. The Rural Connectivity Improvement Project ($100 million) is helping improve remote roads and promote more extensive agriculture and agribusiness development in Nepal. ADB is also supporting upgrades to key airports, including the Tribhuvan and Gautam Buddha international airports. Construction of a runway, an international terminal building, a control tower, an administrative building, and an apron at Gautam Buddha International Airport was completed in 2019.

ADB is providing support for reforms in the energy sector, including the financial restructuring of the Nepal Electricity Authority. The bank has also committed a $20 million loan as additional financing for the SASEC Power System Expansion Project to help the government increase the capacity of the national power grid and foster renewable energy development. In November 2019, ADB signed a $60 million private sector loan to help build and operate a 216-megawatt hydropower plant on the Trishuli River near the capital, Kathmandu. The project will enhance Nepal’s energy security and reduce imports of electricity.

Solar street lamps

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments from ADB’s own funds (in equity and direct loans) in 2019 amounted to $3.00 billion for 38 transactions in economic and social infrastructure, the finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2019, ADB mobilized $3.28 billion of long-term cofinancing and $3.69 billion of cofinancing in trade finance, microfinance, and supply chain finance programs. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $13.78 billion as of 31 December 2019.

Damaged school building in Sindhupalchowk district.

Financing Partnerships

Financing partnerships enable ADB’s development partners, governments or their agencies, multilateral financing institutions, and commercial organizations to participate in financing ADB projects. The additional funds are provided in the form of loans and grants, technical assistance, and other nonsovereign cofinancing such as B loans, risk transfer arrangements, parallel loans and equity, guarantee cofinancing, and cofinancing for transactions under ADB’s Trade Finance Program and Supply Chain Finance Program.

ADB began cofinancing operations in Nepal in 1975. Since then, sovereign cofinancing commitments for Nepal have amounted to $1.77 billion for 48 investment projects, and $83.49 million for 91 technical assistance projects. Nonsovereign cofinancing for Nepal has amounted to $210.58 million for four investment projects.

Projects Cofinanced, 1 January 2014–31 December 2018

Operational Challenges

Lack of adequate infrastructure services is a binding constraint to private sector investment, growth, and development in Nepal. Accelerated and inclusive economic growth is further impeded by the country’s rugged terrain, infrastructure gaps, and inadequate human capital.

Weak governance has long affected the effectiveness of development assistance and Nepal faces challenges to ensure the smooth implementation of federalism. These challenges include limited capacity at subnational levels, slow progress in requisite legislation and deployment of staff, lack of clarity about mandates and responsibilities of the three tiers of government, and a greater need for coordination among these tiers.

Start-up delays, low disbursement, contract management, and availability of materials also affect the implementation of ADB-supported projects in Nepal.

Future Directions

Under its new country partnership strategy for Nepal, ADB will support the development of hydropower and renewable energy; improved road and air transport infrastructure; and better logistics and trade facilitation (especially under SASEC) to strengthen domestic, regional, and international connectivity. The bank will work to reduce the costs of production and trade for businesses, attract private investment, develop livable cities and urban municipalities, deliver quality education and employment-oriented skills training, and lift agricultural productivity to boost rural incomes. Across all programs and projects, ADB will continue to prioritize gender equality, social inclusion, disaster resilience, and environmental sustainability.

ADB will continue to work with Nepal to build sound institutional capacities for sector planning, high project readiness, effective implementation, and sustainable asset management.

This article was originally published in the ADB and Nepal: Fact Sheet. Updated yearly, this ADB Fact Sheet provides concise information on ADB's operations in the country and contact information.

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