ADB's Work in Nepal

Nepal’s economy showed signs of moderate recovery in fiscal year (FY) 2021. Its gross domestic product expanded by 2.3% after contracting by 2.1% in FY2020. The growth was largely supported by a low base effect, the lifting of coronavirus disease (COVID-19) restrictions, and the global economic recovery.

To date, ADB has committed 488 public sector loans, grants, and technical assistance totaling $7.4 billion to Nepal. Cumulative loan and grant disbursements to Nepal amount to $4.66 billion. These were financed by regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds. ADB’s ongoing sovereign portfolio in Nepal includes 35 loans and 6 grants worth $3.4 billion.

Nepal has significantly increased its electricity supply but needs to further boost its power transmission and distribution systems to increase network capacity. In response, ADB committed a $60 million loan as additional support to the ongoing modernization of an electricity grid. The project is automating 34 grid substations, completing the installation of smart meters in Kathmandu Valley, upgrading and constructing transmission lines, and establishing an electricity distribution system command and control center.

A $40 million ADB concessional loan and a $10 million grant support the flood management and mitigation in six priority river basins of the Terai region, which have been hit by major floods in the past 2 decades. The project will construct flood control infrastructure and improve flood forecasting and response systems.

ADB is helping to finance a school sector development plan, which is the government’s major education initiative for FY2017–FY2023. Support is also provided for the rebuilding of schools damaged or destroyed by natural disasters, and for capacity strengthening of institutions in managing disaster risks. ADB is working closely with the government and stakeholders on the Green, Resilient, and Inclusive Development agenda for economic recovery from COVID-19 and the integration of climate change and development interventions.

Nonsovereign operations. Total outstanding balances and undisbursed commitments of ADB’s nonsovereign transactions in Nepal as of 31 December 2021 was $34.89 million representing 0.25% of ADB’s total private sector portfolio.

Operational challenges. The country’s rugged terrain, infrastructure gaps, inadequate human capital and political uncertainty continue to constrain economic growth and development. Nepal is highly vulnerable to disasters caused by natural hazards, climate change, and environmental degradation. COVID-19 also continues to affect Nepal’s achievements on economic growth, inclusiveness, and poverty reduction.

Weak governance has long affected the effectiveness of development assistance to Nepal, and the country faces challenges to ensure the smooth implementation of federalism. These include limited capacity at subnational levels, slow progress in passing needed legislations and deployment of staff, and lack of clarity on the mandates and responsibilities as well as coordination among the three tiers of government. ADB-supported projects in Nepal are also affected by start-up delays, low disbursement, poor contract management, and disruptions in the availability of materials.

COVID-19 vaccine delivery in Kaski in western Nepal. Photo: Narendra Shrestha/ADB

COVID-19 Response

In 2021, the Asian Development Bank’s (ADB) support to the Government of Nepal for the COVID-19 response measures included resources for containment and prevention, protection of vulnerable groups, and relief for small businesses. ADB committed a $165 million loan to procure about 15.9 million dosages of COVID-19 vaccines. The project supports Nepal’s National Deployment and Vaccination Plan. A $5 million grant from the Government of Japan is helping prevent and control the spread of COVID-19 through improving water supply and strengthening health systems in small towns.

Knowledge Work

An ADB technical assistance is helping advance inclusive and sustainable development in Nepal. The project includes analytical and diagnostic studies to inform strategies, plans, and policies; institutional strengthening; and building the capacity of executing and implementing agencies, especially at the subnational level.

ADB knowledge products in 2021 included macroeconomic updates, analyses of the government’s annual budget statement and monetary policy, and a policy brief assessing Nepal’s school education financing in a federal system. Several knowledge seminars were also held and blogs published.

ADB organized trainings on standard operating procedure for staff, consultants, and contractors of ADB-funded projects in Nepal to manage, contain, and minimize the risks of COVID-19 infection in project sites.

  ADB Projects in Nepal Project data sheets for loans, grants, TAs

Future Directions

Under the country partnership strategy for Nepal, 2020–2024, ADB focuses on three priority areas: improving infrastructure for private sector-led growth, improving access to devolved services, and ensuring environmental sustainability and resilience.

To support sustainable recovery from COVID-19 and foster inclusive growth, ADB will continue to help develop Nepal’s infrastructure, strengthen businesses, and improve lives.

ADB is supporting projects for hydropower and renewable energy, upgrading road and air transport infrastructure, and better logistics and trade facilitation to promote regional cooperation and integration. ADB will work to reduce costs for businesses, attract private investment, strengthen public financial management and devolved service delivery, develop livable cities and urban municipalities, deliver quality education and skills training, and lift agricultural productivity to boost rural incomes. ADB will continue to prioritize gender equality, social inclusion, and disaster resilience.

Last updated: 16 January 2023