Kathmandu. Although Nepal was scheduled to graduate from the Least Developed Countries (LDC) category to a developing nation by 2026, the government has formally requested the United Nations to postpone this transition by three years. This request was made due to concerns over potential loss of trade privileges and an increase in economic risks. The budget presented by the National Independent Party, currently leading the government with a new popular mandate following the Gen-G movement, reveals that approximately one-third of the funds come from foreign loans and grants. To manage resources, the government has planned a total budget deficit of around NPR 650 billion, which includes NPR 250 billion from foreign loans and grants and approximately NPR 400 billion from domestic borrowing. However, it has not disclosed the exact breakdown between loans and grants within the NPR 250 billion. Furthermore, a committee has been established to address issues related to foreign borrowing.
The government’s policy programs and budget priorities appear to emphasize loan repayment over grant utilization. Nevertheless, there seems to be limited focus on enhancing the effectiveness of ongoing development programs implemented by more than one hundred international organizations operating within the country. According to the recent annual progress report released by the Association of International Non-Governmental Organizations in Nepal (AIN), multidimensional contributions to development have proven to be highly significant. There are 102 international NGOs currently operating in Nepal that conduct development programs entirely grant-based and debt-free annually, which do not increase the national economic debt burden. These initiatives provide substantial relief to the national economy by breaking the cycle of long-term foreign aid dependency and debt accumulation.
In correspondence with the United Nations, the government has stated that it is implementing the 16th periodic plan with a national commitment to graduate from the LDC status by 2029. Amid ongoing debates about the nature of foreign aid and development partnerships, the results published by AIN offer a different and sustainable development model. Debt-free development and prosperity present a new economic framework very relevant for emerging economies like Nepal, where capital mobilization and foreign currency reserves have traditionally been under constant pressure. Addressing this challenge, AIN channels development investments amounting to NPR 2 billion (equivalent to USD 15 million) annually into the national economy without increasing debt.
