MANILA, PHILIPPINES – The Asian Development Bank (ADB) approved the release of a loan of about $27.5 million equivalent which the Government of Nepal will use for budget support as the country recovers from the devastating earthquakes in April and May 2015.
“This loan will bolster the government’s finances at a time its revenues have been badly affected by the economic losses caused by the earthquakes,” said Mayumi Ozaki, Financial Sector Specialist (Rural and Microfinance), in ADB’s South Asia Department.
The funds come from the second tranche of the Rural Finance Sector Development Program, which has been supporting policy actions to improve the delivery of finance to rural communities. This includes developing new regulatory frameworks for the sector, and reforms to key rural institutions—Agricultural Development Bank Ltd, Small Farmers Development Bank, and Grameen Bikash Bank. The government plans to take further steps to strengthen the rural finance sector.
The earthquakes, which are estimated to have caused damages and losses of about $7 billion, or nearly a third of gross domestic product, have set back Nepal’s efforts to meet the Millennium Development Goal (MDG) for poverty reduction, with as many as 982,000 more people seen falling below the poverty line as a result. Loss of incomes, livelihoods, housing, and some social services are also expected to result in slower progress towards other MDG targets. The bulk of the more than 8 million people affected by the earthquakes live in rural areas.
The economy in fiscal year 2015 had been initially expected to expand 4.6% with pressures on growth from a subnormal monsoon and slowdown in remittance inflows. However that projection has been sharply scaled back to 3% as a result of the impacts from the earthquakes.
Along with the budgetary support loan, ADB has provided Nepal with $200 million in emergency assistance, and a $3 million disaster relief grant. A further $15 million grant from the Japan Fund for Poverty Reduction is also in the pipeline as part of a total amount of up to $600 million, which ADB has pledged to aid the country’s recovery.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.