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Nepal-FOREIGN AID, NEPAL

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Nepal Index

Nepal has been a recipient of foreign assistance since 1952 when it joined the Colombo Plan for Cooperative, Economic, and Social Development in Asia and the Pacific (Colombo Plan--see Glossary). The plan was established, under a slightly different name, by the British Commonwealth countries in 1951. During the 1950s, many Nepalese received scholarships through the Colombo Plan to go to different countries for studies in technical and professional areas.

Also during that time, all other aid was in the form of grants. The bulk of assistance was directed toward developing agriculture, transportation infrastructure, and power generation. Other areas targeted for assistance were communications, industry, education, and health. India and the United States each were responsible for more than one-third of all grants. Both countries established aid missions to Nepal and directed aid to special projects. Other major donors during the 1950s were China and the Soviet Union. Britain, Switzerland, Australia, Japan, and New Zealand also were involved in lesser assistance programs. The United Nations (UN) provided some technical assistance.

Until the mid-1960s, Nepal depended mostly, if not totally, on foreign grants for all its development projects. Most of these grants were on a bilateral basis. Grants from India helped to build the airport in Kathmandu, the Kosi Dam, and various irrigation projects. The Soviet Union helped to build cigarette and sugar factories, a hydroelectric plant, and part of the East-West Highway. Grants from China helped to construct roads; a trolley bus line in Kathmandu; and leather and shoe, brick, and tile factories. United States grants supported village development, agriculture, education, and public health. The United States also helped to start the Nepal Industrial Development Corporation, which granted loans to several industries (see Money and Banking , this ch.).

Beginning in the 1960s, some bilateral assistance was in the form of loans. The loan share of foreign aid increased from under 4 percent between 1965 and 1970 to more than 25 percent by the 1985-88 period (see table 18, Appendix).

In the 1970s, multilateral assistance programs started to play an important role in development planning and accounted for more than 70 percent of funding for development planning. By the end of the 1980s, the great majority of foreign aid was in the form of multilateral assistance programs. The major sources of borrowing or grants for these programs were the International Development Association of the World Bank and the Asian Development Bank. Most of these loans could be characterized as soft loans (see Glossary).

Sources of foreign aid were numerous. Eleven UN agencies, seven multilateral lending agencies (such as the World Bank), and eight private agencies (for example, the Ford Foundation) had participated in aid programs. At least seventeen countries offered bilateral assistance. Under the auspices of World Bank, the Nepal Aid Group was created in 1976. By 1987 sixteen countries and six international agencies participated in the group. The level of commitment from the Nepal Aid Group had increased from Rs1.5 billion in 1976-77 to Rs5.6 billion in 1987-88. The bulk of foreign aid contributions after 1976 came from this group.

Most economic development projects were funded with external assistance on concessional terms. In the mid- to late 1980s, recorded aid disbursements averaged more than US$200 million annually--about 7 percent of GDP. More than 70 percent of the aid was in the form of grants; the remainder was in the form of concessional loans. A high percentage of technical assistance and direct aid payments were not documented. Much of the aid granted was underused (see table 19, Appendix).

As of 1991, Nepal was receiving external assistance in the form of project aid, commodity aid, technical assistance, and program aid. Project aid funded irrigation programs, hydroelectric plants, and roads. Commodity assistance targets included fertilizers, improved seeds, and construction materials provided by donor aid agencies. Technical assistance covered services of experts to advise the government in training indigenous personnel to perform research in technological fields and resulted in the development of skilled labor. Program aid supported various projects, in particular the agricultural and health fields.

Dependence on foreign aid was increasing. Between 1984 and 1987, foreign aid as a percentage of GNP increased from under 8 percent to almost 13 percent. Debt service as a percentage of GDP increased from less than 0.1 percent in 1974-75 to almost 1 percent in 1987-88. Outstanding debt in this period increased from Rs346 million to almost Rs21 billion.

From FY 1970 through FY 1988, United States commitments, including United States Export-Import Bank (Eximbank--see Glossary) funds, totaled US$285 million. In the 1980s, bilateral United States economic assistance channelled through the Agency for International Development averaged US$15 million annually. The United States also contributed to various international institutions and private voluntary organizations that serviced Nepal for a total contribution to multilateral aid in excess of US$250 million in the 1980s. Other Western countries and official development assistance (ODA--see Glossary) and bilateral commitments for the 1980-87 period totaled US$1.8 billion. The Organization of Petroleum Exporting Countries (OPEC) provided US$30 million in bilateral aid from 1979 to 1989. Communist countries provided US$273 million in aid from 1970 to 1988. From 1981 until 1988, Japan was the premier source of bilateral ODA for Nepal, accounting for more than one-third of all funds. The second biggest donor during that period was the Federal Republic of Germany (West Germany).

Data as of September 1991

Background		In 1951, the Nepalese monarch ended the century-old system of rule by hereditary premiers and instituted a cabinet system of government. Reforms in 1990 established a multiparty democracy within the framework of a constitutional monarchy. An insurgency led by Maoist extremists broke out in 1996. The ensuing ten-year civil war between insurgents and government forces witnessed the dissolution of the cabinet and parliament and assumption of absolute power by the king. Several weeks of mass protests in April 2006 were followed by several months of peace negotiations between the Maoists and government officials, and culminated in a November 2006 peace accord and the promulgation of an interim constitution. Following a nation-wide election in April 2008, the newly formed Constituent Assembly declared Nepal a federal democratic republic and abolished the monarchy at its first meeting the following month. The Constituent Assembly elected the country's first president in July. The Maoists, who received a plurality of votes in the Constituent Assembly election, formed a coalition government in August 2008, but resigned in May 2009 after the president overruled a cabinet decision to fire the chief of the army staff.
Location		Southern Asia, between China and India
Area(sq km)		total: 147,181 sq km land: 143,351 sq km water: 3,830 sq km
Geographic coordinates		28 00 N, 84 00 E
Land boundaries(km)		total: 2,926 km border countries: China 1,236 km, India 1,690 km
Coastline(km)		0 km (landlocked)
Climate		varies from cool summers and severe winters in north to subtropical summers and mild winters in south
Elevation extremes(m)		lowest point: Kanchan Kalan 70 m highest point: Mount Everest 8,850 m
Natural resources		quartz, water, timber, hydropower, scenic beauty, small deposits of lignite, copper, cobalt, iron ore
Land use(%)		arable land: 16.07% permanent crops: 0.85% other: 83.08% (2005)
Irrigated land(sq km)		11,700 sq km (2003)
Total renewable water resources(cu km)		210.2 cu km (1999)
Freshwater withdrawal (domestic/industrial/agricultural)		total: 10.18 cu km/yr (3%/1%/96%) per capita: 375 cu m/yr (2000)
Natural hazards		severe thunderstorms; flooding; landslides; drought and famine depending on the timing, intensity, and duration of the summer monsoons
Environment - current issues		deforestation (overuse of wood for fuel and lack of alternatives); contaminated water (with human and animal wastes, agricultural runoff, and industrial effluents); wildlife conservation; vehicular emissions
Environment - international agreements		party to: Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Ozone Layer Protection, Tropical Timber 83, Tropical Timber 94, Wetlands signed, but not ratified: Marine Life Conservation
Geography - note		landlocked; strategic location between China and India; contains eight of world's 10 highest peaks, including Mount Everest and Kanchenjunga - the world's tallest and third tallest - on the borders with China and India respectively
Population		28,563,377 (July 2009 est.)
Age structure(%)		0-14 years: 36.6% (male 5,327,484/female 5,127,178) 15-64 years: 59.2% (male 8,094,494/female 8,812,675) 65 years and over: 4.2% (male 566,666/female 634,880) (2009 est.)
Median age(years)		total: 20.8 years male: 19.8 years female: 21.7 years (2009 est.)
Population growth rate(%)		1.281% (2009 est.)
Birth rate(births/1,000 population)		23.18 births/1,000 population (2009 est.)
Death rate(deaths/1,000 population)		6.97 deaths/1,000 population (July 2009 est.)
Net migration rate(migrant(s)/1,000 population)		-3.39 migrant(s)/1,000 population (2009 est.)
Urbanization(%)		urban population: 17% of total population (2008) rate of urbanization: 4.9% annual rate of change (2005-10 est.)
Sex ratio(male(s)/female)		at birth: 1.04 male(s)/female under 15 years: 1.04 male(s)/female 15-64 years: 0.92 male(s)/female 65 years and over: 0.89 male(s)/female total population: 0.96 male(s)/female (2009 est.)
Infant mortality rate(deaths/1,000 live births)		total: 47.46 deaths/1,000 live births male: 47.4 deaths/1,000 live births female: 47.52 deaths/1,000 live births (2009 est.)
Life expectancy at birth(years)		total population: 65.46 years male: 64.3 years female: 66.67 years (2009 est.)
Total fertility rate(children born/woman)		2.64 children born/woman (2009 est.)
Nationality		noun: Nepalese (singular and plural) adjective: Nepalese
Ethnic groups(%)		Chhettri 15.5%, Brahman-Hill 12.5%, Magar 7%, Tharu 6.6%, Tamang 5.5%, Newar 5.4%, Muslim 4.2%, Kami 3.9%, Yadav 3.9%, other 32.7%, unspecified 2.8% (2001 census)
Religions(%)		Hindu 80.6%, Buddhist 10.7%, Muslim 4.2%, Kirant 3.6%, other 0.9% (2001 census) note: only official Hindu state in the world
Languages(%)		Nepali 47.8%, Maithali 12.1%, Bhojpuri 7.4%, Tharu (Dagaura/Rana) 5.8%, Tamang 5.1%, Newar 3.6%, Magar 3.3%, Awadhi 2.4%, other 10%, unspecified 2.5% (2001 census) note: many in government and business also speak English (2001 est.)
Country name		conventional long form: Federal Democratic Republic of Nepal conventional short form: Nepal local long form: Sanghiya Loktantrik Ganatantra Nepal local short form: Nepal
Government type		federal democratic republic
Capital		name: Kathmandu geographic coordinates: 27 43 N, 85 19 E time difference: UTC+5.75 (10.75 hours ahead of Washington, DC during Standard Time)
Administrative divisions		14 zones (anchal, singular and plural); Bagmati, Bheri, Dhawalagiri, Gandaki, Janakpur, Karnali, Kosi, Lumbini, Mahakali, Mechi, Narayani, Rapti, Sagarmatha, Seti
Constitution		15 January 2007 (interim Constitution); note - in April 2008, a Constituent Assembly was elected to draft and promulgate a new constitution by May 2010
Legal system		based on Hindu legal concepts and English common law; has not accepted compulsory ICJ jurisdiction
Suffrage		18 years of age; universal
Executive branch		chief of state: President Ram Baran YADAV (as of 23 July 2008); Vice President Paramananda JHA (as of 23 July 2008) head of government: Prime Minister Madhav Kumar NEPAL (as of 25 May 2009); Deputy Prime Minister Bijay Kumar GACHHEDAR cabinet: cabinet formed in May 2009 by a majority coalition made up of the Communist Party of Nepal-United Marxist-Leninist, Nepali Congress, Madhesi People's Rights Forum, and several smaller parties elections: president elected by Parliament; term extends until the new constitution is promulgated; election last held 21 July 2008; date of next election NA election results: Ram Baran YADAV elected president by the Constituent Assembly in a second round of voting on 21 July 2008; Ram Baran YADAV 308, Ram Jaja Prasad SINGH 282
Legislative branch		unicameral Constituent Assembly (601 seats; 240 seats decided by direct popular vote; 335 seats by proportional representation; 26 appointed by the Cabinet (Council of Ministers)) elections: last held 10 April 2008 (next to be held NA) election results: percent of vote by party - CPN-M 38%, NC 19%, CPN-UML 19%,Madhesi People's Right Forum 9%, Terai-Madhes Democratic Party and Sadbhavana Party 5%, other 10%; seats by party - CPN-M 220, NC 110, CPN-UML 103, Madhesi People's Rights Forum 52, Terai-Madhes Democratic Party 20, Sadbhawana Party 9, other smaller parties 61; note - 26 seats filled by the new Cabinet
Judicial branch		Supreme Court or Sarbochha Adalat (the president appoints the chief justice is appointed by the monarch on recommendation of the Constitutional Council; the chief justice appoints other judges on the recommendation of the Judicial Council)
Political pressure groups and leaders		other: several small armed Madhesi groups along the southern border with India; a variety of groups advocating regional autonomy for individual ethnic groups
International organization participation		ADB, BIMSTEC, CP, FAO, G-77, IAEA, IBRD, ICAO, ICC, ICRM, IDA, IFAD, IFC, IFRCS, ILO, IMF, IMO, Interpol, IOC, IOM, IPU, ISO (correspondent), ITSO, ITU, ITUC, MIGA, MINURCAT, MINUSTAH, MONUC, NAM, OPCW, SAARC, SACEP, UN, UNAMID, UNCTAD, UNESCO, UNIDO, UNIFIL, UNMIL, UNMIS, UNMIT, UNOCI, UNTSO, UNWTO, UPU, WCL, WCO, WFTU, WHO, WIPO, WMO, WTO
Flag description		red with a blue border around the unique shape of two overlapping right triangles; the smaller, upper triangle bears a white stylized moon and the larger, lower triangle bears a white 12-pointed sun
Economy - overview		Nepal is among the poorest and least developed countries in the world with almost one-third of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for about one-third of GDP. Industrial activity mainly involves the processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. Bumper crops, better security, improved transportation, and increased tourism pushed growth past 5% in 2008, after growth had hovered around 3% - barely above the rate of population growth - for the previous three years. The deteriorating world economy in 2009 will challenge tourism and remittance growth, a key source of foreign exchange. Nepal has considerable scope for exploiting its potential in hydropower and tourism, areas of recent foreign investment interest. Prospects for foreign trade or investment in other sectors will remain poor, however, because of the small size of the economy, its technological backwardness, its remoteness and landlocked geographic location, its civil strife and labor unrest, and its susceptibility to natural disaster.
GDP (purchasing power parity)		$31.39 billion (2008 est.) $29.81 billion (2007 est.) $28.86 billion (2006 est.) note: data are in 2008 US dollars
GDP (official exchange rate)		$12.28 billion (2008 est.)
GDP - real growth rate(%)		5.3% (2008 est.) 3.3% (2007 est.) 3.4% (2006 est.)
GDP - per capita (PPP)		$1,100 (2008 est.) $1,100 (2007 est.) $1,100 (2006 est.) note: data are in 2008 US dollars
GDP - composition by sector(%)		agriculture: 32.5% industry: 16.6% services: 50.9% (FY07 est.)
Labor force		14.6 million note: severe lack of skilled labor (2008 est.)
Labor force - by occupation(%)		agriculture: 76% industry: 6% services: 18% (2004 est.)
Unemployment rate(%)		46% (2008 est.) 42% (2004 est.)
Population below poverty line(%)		30.9% (2004)
Household income or consumption by percentage share(%)		lowest 10%: 2.7% highest 10%: 40.6% (2006)
Distribution of family income - Gini index		47.2 (2008) 36.7 (1996)
Budget		revenues: $1.7 billion expenditures: $2.3 billion (FY08)
Inflation rate (consumer prices)(%)		7.7% (2008 est.) 6.4% (2007 est.)
Stock of money		$2.106 billion (31 December 2008) $2.184 billion (31 December 2007)
Stock of quasi money		$4.885 billion (31 December 2008) $4.745 billion (31 December 2007)
Stock of domestic credit		$5.556 billion (31 December 2008) $5.636 billion (31 December 2007)
Market value of publicly traded shares		$5.5 billion (31 December 2008) $4.909 billion (31 December 2007) $1.805 billion (31 December 2006)
Economic aid - recipient		$427.9 million (2005)
Agriculture - products		pulses, rice, corn, wheat, sugarcane, jute, root crops; milk, water buffalo meat
Industries		tourism, carpets, textiles; small rice, jute, sugar, and oilseed mills; cigarettes, cement and brick production
Industrial production growth rate(%)		1.8% (FY08)
Current account balance		$241 million (2008) $58 million (2007)
Exports		$868 million (2008) $830 million (2006)
Exports - commodities(%)		clothing, carpets, leather goods, jute goods, pulses, grain
Exports - partners(%)		India 59.2%, US 8.7%, Bangladesh 8.3%, Germany 4.3% (2008)
Imports		$3.229 billion (2008) $2.398 billion (2006)
Imports - commodities(%)		petroleum products, machinery and equipment, electrical goods
Imports - partners(%)		India 55.4%, China 13.3%, Singapore 2% (2008)
Debt - external		$3.285 billion (2008) $3.07 billion (March 2006)
Stock of direct foreign investment - at home		$NA
Stock of direct foreign investment - abroad		$NA
Exchange rates		Nepalese rupees (NPR) per US dollar - 65.21 (2008), 70.35 (2007), 72.446 (2006), 72.16 (2005), 73.674 (2004)
Currency (code)		Nepalese rupee (NPR)
Telephones - main lines in use		805,100 (2008)
Telephones - mobile cellular		4.2 million (2008)
Telephone system		general assessment: poor telephone and telegraph service; fair radiotelephone communication service and mobile-cellular telephone network domestic: combined fixed-line and mobile-cellular telephone service subscribership base only about 15 per 100 persons international: country code - 977; radiotelephone communications; microwave landline to India; satellite earth station - 1 Intelsat (Indian Ocean) (2008)
Internet country code		.np
Internet users		499,000 (2008)
Airports		47 (2009)
Roadways(km)		total: 17,282 km paved: 10,142 km unpaved: 7,140 km (2007)
Military branches		Nepal Army (2009)
Military service age and obligation(years of age)		18 years of age for voluntary military service; 15 years of age for military training; no conscription (2008)
Manpower available for military service		males age 16-49: 7,322,965 females age 16-49: 6,859,064 (2008 est.)
Manpower fit for military service		males age 16-49: 4,886,103 females age 16-49: 5,525,764 (2009 est.)
Manpower reaching militarily significant age annually		male: 365,567 female: 352,643 (2009 est.)
Military expenditures(% of GDP)		1.6% of GDP (2006)
Disputes - international		joint border commission continues to work on contested sections of boundary with India, including the 400 square kilometer dispute over the source of the Kalapani River; India has instituted a stricter border regime to restrict transit of Maoist insurgents and illegal cross-border activities; approximately 106,000 Bhutanese Lhotshampas (Hindus) have been confined in refugee camps in southeastern Nepal since 1990
Refugees and internally displaced persons		refugees (country of origin): 107,803 (Bhutan); 20,153 (Tibet/China) IDPs: 50,000-70,000 (remaining from ten-year Maoist insurgency that officially ended in 2006; displacement spread across the country) (2007)
Electricity - production(kWh)		2.781 billion kWh (2007 est.)
Electricity - production by source(%)		fossil fuel: 8.5% hydro: 91.5% nuclear: 0% other: 0% (2001)
Electricity - consumption(kWh)		2.243 billion kWh (2007 est.)
Electricity - exports(kWh)		140 million kWh (2007 est.)
Electricity - imports(kWh)		213 million kWh (2008 est.)
Oil - production(bbl/day)		0 bbl/day (2008 est.)
Oil - consumption(bbl/day)		18,000 bbl/day (2008 est.)
Oil - exports(bbl/day)		0 bbl/day (2007 est.)
Oil - imports(bbl/day)		16,920 bbl/day (2007 est.)
Oil - proved reserves(bbl)		0 bbl (1 January 2009 est.)
Natural gas - production(cu m)		0 cu m (2008 est.)
Natural gas - consumption(cu m)		0 cu m (2008 est.)
Natural gas - exports(cu m)		0 cu m (2008)
Natural gas - proved reserves(cu m)		0 cu m (1 January 2009 est.)
HIV/AIDS - adult prevalence rate(%)		0.5% (2007 est.)
HIV/AIDS - people living with HIV/AIDS		70,000 (2007 est.)
HIV/AIDS - deaths		5,000 (2007 est.)
Major infectious diseases		degree of risk: high food or waterborne diseases: bacterial diarrhea, hepatitis A, and typhoid fever vectorborne disease: Japanese encephalitis, malaria, and dengue fever (2009)
Literacy(%)		definition: age 15 and over can read and write total population: 48.6% male: 62.7% female: 34.9% (2001 census)
School life expectancy (primary to tertiary education)(years)		total: 9 years male: 10 years female: 8 years (2003)
Education expenditures(% of GDP)		3.4% of GDP (2003)