5. Short-term Aid Priorities

5.1 Regarding the achievements of foreign aid in Nepal, concerns and challenges between donors and Nepali counterparts were mentioned above. Keeping such interests in mind, the Nepal government has started some important efforts. These efforts include poverty alleviation strategies and medium-term spending arrangements, as well as reforms in budget allocation and management processes. The poverty alleviation strategy paper and medium-term spending arrangements prepared under the leadership and ownership of the government have made necessary efforts to improve the emphasis on government spending. The medium-term expenditure arrangement is contrary to the budget concept based on real accounting, which favors the availability of funds, keeping in mind the inadequacy of funds. With the goal of not doing more programs than needed, development programs and activities have been prioritized and made objective to a large extent in the medium-term spending regime. Although there are many tasks to be completed in the coming days, the government has made this new initiative as a determined effort to deal with the obstacles in the effectiveness of aid programs and public expenditure management. Getting support from the political level and other stakeholders, especially regarding the prioritization of spending, is still a challenge.

5.2 The medium-term spending arrangement process will have a significant impact not only on the Nepali side, but also on the donor community. Here, it will be relevant to briefly mention how it will affect foreign aid in the short term. A detailed discussion on this will be in the document on medium-term expenditure arrangements.

(a) The medium-term expenditure arrangements will reflect the priorities determined by the Tenth Plan and Interim Poverty Alleviation Strategy Paper. If the donor-directed development of the current development system is to be ended, then the donor must respect and follow the priorities set in it. Datrupaksha and NEPA in the coming days to resolve the difference in approachThere should be an active and fruitful dialogue between the parties.

(b) The main message of the medium-term expenditure arrangement is that Nepal needs to strengthen its development efforts based on the reality of resource availability. This does not mean that some new projects cannot be added. But now it is not appropriate to emphasize on project assistance. In the coming year, there will be improvement in the status of the means and implementation capacity, and after the completion of the current plans, it will be possible to add new projects within the national priorities determined by the government.
(c) In line with the objectives of the medium-term expenditure system and poverty alleviation strategy paper, it is necessary to emphasize the sectoral activities that have a direct impact on the objective of alleviating national and regional poverty and achieving economic growth. Dalo expenditure system will be encouraged to run regional programs. However, a special donor can support a separate project within the scope of regional priorities.
(d) As mentioned above, the mid-term expenditure structure and poverty alleviation strategy papers have emphasized more on the service delivery side, results and achievement side of the programs instead of emphasizing on the traditional method of resource utilization. The main feature of the new concept is to use sufficient investment in the operation and maintenance of existing projects and programs rather than investing in new areas. To support this kind of change and to effectively monitor the use of expenditure for current activities, the Government of Nepal has recently changed the budget classification. It is expected that by supporting annual expenses such as operation and maintenance in line with this change, the philanthropic community will help to get the maximum benefit from the investment and bring efficiency in service delivery.
(e) According to this, there should be a significant change in the structure of aid in the short term. In the current financial situation, the government has to spend a significant portion of the revenue to meet general and non-reducible expenses in particular. This will further reduce the government funds available for developmentis Therefore, the current need for Nepal is to receive budget support in the form of cash grants and loans and regional program support.
(f) The government is aware of the interest that the assistance provided by the donor may not be spent for the purpose for which it was received but spent elsewhere. In fact, along with improving the budget allocation process through medium-term expenditure structure, it is equally necessary to improve the implementation and monitoring of all levels of expenditure. In the coming days, the government will decide on this matter after consulting and supporting the donors. To achieve this objective, as mentioned above, improvements in budget classification and the National Financial Responsibility Study have been completed with the help of international donors. In terms of additional technical assistance programs, it is necessary to strengthen implementation, monitoring and accountability at all important levels (such as related ministries, district and local level units) with the help of donors.