Nepal s improved debt paying capacity prompted multilateral donors to cut off grants. The Asian Development Bank decided to cut off grants 2 weeks ago which was being provided to Nepal under the Asian Development Fund while the World Bank mulls over the same.
Madhu Kumar Marasini, chief of International Economic Aid Coordination Division of Ministry of Finance, informed that the World Bank is to follow suit. The multilateral development partners will provide loans with 30 years of gestation period and nominal interests.
Debt Sustainability Analysis carried out by the International Monetary Fund and the World Bank said that Nepal remains at moderate risk of debt distress.The baseline external public debt indicators show that external debt dynamics are sound and broadly resilient to standard stress tests.
Vice president of ADB, Wencai Zhang informed the decision to cut off grants to Finance Minister Ram Sharan Mahat. Minister Mahat requested Zhang to reconsider the decision.
Zhang said that the multilateral donor decided to provide Asian Development Fund (ADF) loan after their assessment of Nepal s micro-economic situation, social development and country´s portfolio performance.
ADB was providing grants worth US $100 million annually while World Bank grants the International Development Association comprises about 50% of its total donations. The World Bank s donations to Nepal hovers US $250 million.
Marasini said that they have requested the World Bank to consider Nepal s transitional political situation.