1. The Role of Foreign Aid: An Overview 1.1 After Nepal entered the planned development process with the initiation of the first five-year plan (2013-2018) in the mid-fifties, foreign aid began as a mechanism to raise development expenses. Since then, 55 percent of the annual cost of development expenditure has been covered by foreign aid. At present, the share of foreign aid in the GDP is 5-6 percent and the total government expenditure is 25-30 percent. In terms of sectoral distribution, the largest share of foreign aid has been spent on agriculture, forestry and fisheries programs, followed by energy, transport, health, social development and human resource development.

1.2 Development of Nepal Foreign aid has been playing an important role. In addition to contributing to sustaining public investment, achieving sustainable and high economic growth, achieving the objectives of poverty alleviation set by periodic plans and supporting important sectoral programs and activities, foreign aid has provided significant support. The role of foreign aid is important as there are structural constraints, large financial and external deficits and imbalanced savings and investment ratios in the Nepalese economy. Foreign aid provides assistance as follows:-

(a) Helping to meet Nepal's low internal savings, increasing it and providing assistance in mobilizing resources for poverty alleviation.
(b) Disbursement of aid to priority areas to accelerate development activities.
(c) Creating a suitable environment to attract foreign direct investment and private sector investment.
(d) Increasing the national capacity to identify, evaluate and adopt technologies for production and growth of the economy, this aspect is one of the basic conditions for poverty alleviation. 1.3 In recent years, there has been a radical change in the structure of Nepal's foreign aidIt is The share of bilateral aid in total foreign aid has decreased to a quarter now. Likewise, the share of grant support is continuously decreasing, while the share of loans has increased to three quarters of the total support. Another important feature of the current foreign aid pattern is the gradual increase in the share of technical assistance in total aid. More than 40 percent of the total foreign aid is occupied by technical assistance, and the technical assistance that is not linked to specific projects, which is considered an important part of technical assistance, has increased at an annual rate of 17 percent during the period of 1990-1999. The ratio of debt to the total foreign aid amount has gradually increased, and the foreign debt that Nepal has to pay has reached about 50 percent of the gross domestic product, which, although not more than other developing countries, is becoming burdensome for Nepal.

1.4 countries. Realizing the important role of foreign aid in the economy, this policy paper tries to analyze the process of foreign aid, its problems and possibilities to effectively achieve development returns from the use of foreign aid by fulfilling the need for increasing resources for development activities. At the beginning of this policy paper, the past achievements and problems of foreign aid will be briefly reviewed from the point of view of both the national and donor community. After that, various steps to be taken by the Government of Nepal to solve these problems, regularize the flow and structure of aid and ensure appropriate deployment of such aid, new guidelines, policies and strategies will be mentioned. In addition to this, the impact of this on the aid received from the philanthropic community and the policies and programs that the philanthropic community should adjust to support Nepal's development efforts will also be briefly mentioned.