Virginia Tech®home

A Reflection on Competing Perspectives on International Aid in Nepal



Authors as Published


A personal review of scholarly articles, news articles, recorded interviews and government publications during the last two years concerning international aid to Nepal have prompted me to ask whether such initiatives are succeeding under the existing policy context and with current development practices. As I have reflected on this issue, I have considered not only what I have recently read concerning this question, but also my own experience in Nepal working professionally with internationally funded aid projects during the past decade.  

Following ratification of a new federal constitution in 2015, Nepal has undergone a historic political shift from a unitary governance system into a federated hierarchy with seven states and 753 local governments (Acharya, 2018a). The country’s new governance framework arose from a comprehensive peace agreement between the Maoist party and the Government of Nepal in 2007 that ended a 10-year civil war. Nepal’s new constitution sought to ensure that its people would enjoy freedom, peace, democracy and social and economic prosperity. In May 2019, the majority Nepal Communist Party (CPN) announced an annual budget of 1.53 trillion Nepali Rupees (13.71 billion U.S. dollars) to operate the nation’s government for the 2019-2020 fiscal year. Foreign aid provided approximately 23% of that spending plan (Nepal Economic Forum, 2019).

Nepal has received international assistance for nearly seven decades and those efforts have touched all sectors of the country’s economy. The United States established diplomatic relations with Nepal in 1947 and became the nation’s first foreign donor in 1951. Foreign aid fully financed Nepal’s first five-year development plan (1956-60) (Bhattarai, 2018). The country’s five largest development partners today are the World Bank, the Asian Development Bank, the United Kingdom, the United States and the European Union (EU). Earlier this year, the Nepalese government adopted its first policy regulating foreign aid since adoption of the nation’s new constitution in 2015. That strategy confirmed the need for continued international assistance to reduce poverty and achieve inclusive and sustainable economic growth. 

Nepal remains one of the world’s least developed nations. Meanwhile, the country’s government has embraced a socio-economic development model aimed at achieving the long-term goal of providing conditions for “Prosperous Nepal, Happy Nepalis” (Ministry of Finance 2018). This stance has assumed that “overall development is only possible through high economic growth and its equitable distribution" (Ministry of Finance, 2018). This aspiration suggests that Nepal will require financial assistance in coming years for the following reasons:

  • The restructured and more extensive governmental system will require more resources, especially for infrastructure development and the capacity to sustain and maintain those efforts;
  • The 2015 constitution provided the country’s citizens fundamental rights relating to economic and social development;
  • Nepal now aims to secure the status of a developing country by 2022;
  • The government has committed to achieving the UN's Sustainable Development Goals (SDGs) for the country by 2030;
  • The nation has assigned high priority to infrastructure development (railways, waterways, airports, roads and hydropower) and attaining an annual economic growth rate (in GDP) of more than 8.5%.

Discourses on the Opportunities and Challenges of Foreign Aid

International assistance seeks to promote social and economic development and combat poverty in underdeveloped and developing countries. It has arguably played a significant role in such nations in many respects, from infrastructure development and economic growth to democracy-building since such efforts began following World War II (Acharya, 2018b.; Cecen, 2014; Pandey, 2017). Nepal, with the help of foreign assistance, has made significant headway in its fight against extreme hardship within its citizenry. For example, the country’s poverty headcount ratio declined from 75% in 1984 to 15% in 2010[1] (Index Mundi, n.d.). While deep indigence remains a challenge in Nepal, this change certainly indicates a positive shift. Similarly, the Global Development Network (2018) has claimed that most international rural development project aid is systematically evaluated and that most such assessments, including those in Nepal, have suggested that such efforts result in positive impacts on livelihoods and poverty reduction for the populations to which they have been targeted.

In contrast, some analysts have claimed that aid-sponsored development to Nepal, in particular, has failed (Bell, 2015; Sharma, 2011; Tiwari, 2005). For example, in an interview with the editor of The Third Pole, Dipak Gyawali, a Nepali development expert and former government water resources minister, said in 2017, “most of the big donor interventions have been constructive where donors have been plural or more clumsy. But in many cases, they have come with a grand single vision of imposition and they have failed badly” (Gyawali, 2017). Other critics of international aid in Nepal have argued that dependency on overseas support has created a mindset among Nepali recipients that outsiders can serve as their problem solvers. This critique suggests that such an orientation limits people’s own actions on behalf of community change (Malla, 2014; Pokherel, 2019).

More generally, those criticizing foreign aid have offered two basic arguments. First, these authors have contended that aid imposes strict conditions that often dilute the pursuit of national interests and priorities (Pokharel, 2019). Yubaraj Shangraula (former Nepali Attorney General and current writer and political analyst), for example, embraced this critical view in a television interview in 2018, arguing that donors often demand that recipient countries suspend or create specific policies in exchange for aid (Shangraula, 2018). That is, in this view, a donor’s political and strategic interests often dictate the aid process, rather than any genuine concern about improving life conditions or promoting good governance in recipient counties (Lyons, 2014).

A second criticism of foreign aid, also offered in Nepal, suggests that outsiders have a basic knowledge problem and that they do too little to ensure that their initiatives incorporate indigenous knowledge and practices, a fact that diminishes the value of many of their efforts (Karkee and Comfort, 2016; Warner, 2017). In a variant of this argument, Mohan Banjade, a legal expert, development analyst and former government secretary, for example, has suggested that foreign assistance in Nepal that has sought to support the preservation of local languages and culture has often had the opposite effect (Banjade, 2018). Put differently, these arguments posit that international aid inevitably cultivates donor agendas, rather than local ones. Representatives of those agencies and NGO personnel, however, have contested this view and instead contended that weak aid-absorption-capacity and lack of commitment to institutional reform among aid recipients has often been responsible for aid ineffectiveness in Nepal when such has occurred (Sharma, 2014).

Disjunction between Nepal’s Policy Concerning Foreign Aid and its Actions

The Nepalese government has suggested that it will accept foreign assistance in areas and sectors that it has determined to be necessary for the development of the country and that its departments should administer that support within the nation’s budgetary system. However, some foreign donors have hesitated  to provide aid directly to Nepal due to the government’s track record of poor spending capacity and administrative inefficiency (Pandey, 2017). In a similar vein, representatives of international aid agencies have blamed the Nepali government for hindering their work by delaying project approvals (Pattisson, 2017). In addition, in many cases, funding agencies will not provide assistance until their terms have been accepted by recipient governments. For their part, a share of Nepal’s public officials have questioned donors’ political and religious neutrality (The New Humanitarian, 2013). To address these concerns, the government has developed a policy suggesting that it will not accept foreign aid that might interfere with its sovereignty or negatively affect the country’s religious, ethnic and social harmony or national security. Nevertheless, and in fact, many experts agree that the government has not taken its formally adopted aid management policy seriously. In sum, there is a disconnect between the government’s formal stance toward assistance and its apparent desire and capacity to enforce it effectively.

My Personal Reflections on Aid to Nepal’s Rural Communities

My 10 years of professional experience working in Nepal’s rural communities as an engineer, researcher and project manager for international donor-funded projects has shaped my perspective on foreign assistance. I have worked directly with hundreds of such communities to plan, design and construct school buildings, culverts, roads, irrigation and water systems and market centers, among other projects. And, in contrast to some critics of aid, I have been involved with many such projects that have materially improved rural citizen livelihoods, reduced poverty and boosted local economies. More, in my view, sustained community involvement in the design and implementation of those efforts was integral to their eventual sustainability or failure.

Similarly, while analysts have argued that foreign assistance does not reach the nation’s neediest communities, the international and domestic nongovernmental organizations implementing foreign donor-funded initiatives with which I have worked have sought vigorously to reach out to help the most poor in remote areas of Nepal. My experience has not accorded with the view that aid is ineffective or only or primarily offered to secure donor political aims.

Overall, in my judgment, international assistance does not, in principle, harm recipient nations. The recipient government’s goal should be to regulate that aid effectively so as to ensure that it does not negatively affect its internal and sensitive affairs while also promoting engagement that positively benefits the nation’s communities. In the case of Nepal, the government should seek to manage its internationally provided resources effectively and to negotiate with donor countries in the broader interests of its people concerning the availability and distribution of needed aid (Pokharel, 2019).

Concluding Thoughts

This reflection has broadly reviewed the continuing debate concerning the efficacy of foreign assistance to developing nations in light of Nepal’s experience. Critics have argued that aid creates dependency, fosters corruption and erodes local social value systems. While I have not here provided a thoroughgoing solution to these concerns, I have contended that assistance can be effective when approached in concert with community leaders and residents. There is no one-size-fits-all approach to “healthy aid,” but given Nepal’s manifest needs, international aid will remain of paramount importance to complement the country’s internal resources for the foreseeable future. The nation’s government must enforce its foreign assistance policy in cooperation with international aid organizations. Donors must be expected to comply with domestic priorities and to employ Nepal’s fiscal institutions and frameworks to implement their initiatives. Likewise, Nepal must ensure that its institutions can effectively assume that responsibility. Reliable aid can be an important resource for the country if it is wisely used to serve its needs.


[1] A poverty headcount ratio at $1.90 a day is the percentage of the population living on less than $1.90 a day at 2011 international prices (Index Mundi, n.d.).


Acharya, K. (2018a). “Local Governance Restructuring in Nepal: From Government to Governmentality.” Dhaulagiri Journal of Sociology and Anthropology. 12, pp. 37-49.

Acharya, K. (2018b). “Foreign Aid in Nepal.”  Accessed August 21, 2019.

Banjade, M (2018, July 9). Sinhadaravaramai Videsi Jasusako Veigaiid (T.Yatri, AP1). Retrieved from

Bell,T.(2015). “Nepal's Failed Development.” Opinion/Asia. Al Jazeera. Accessed September 9, 2019.

Cecen, A., Xiao, L. and Adhikari, S. (2014). “Institutions, Economic Growth, and Foreign Aid in Nepal.” International Journal of Economics and Finance; 6(6), pp. 84-94.

Global Development Network (2018). “Considering the Effectiveness of Foreign Aid: Global Trends, Challenges And Implications For Nepal.” Proceedings Report. International Economic Cooperation Coordination Division (IECCD)/Ministry of Finance (MOF), Kathmandu, Nepal. July 2018.

Gyawali, D. (2017, March 21). Has foreign aid harmed more than helped Nepal? The Third Pole. (Ramesh B., Retrieved from

Index Mundi. (n.d.). Nepal Poverty Headcount Ratio, Nepal Poverty Rates. Index Mundi. Accessed August 27, 2019.

Karkee R. and Comfort J. (2016). “NGOs, Foreign Aid, and Development in Nepal.” Frontiers in Public Health 4, p.177.

Lyons, J. (2014). “Foreign aid is hurting, not helping Sub-Saharan Africa.” October 13. Le Journal International.

Malla, M.V (2013). “Foreign Aid and Democratization in Nepal: Culture of Dependency.” In Devkota, P.; Goossenaerts, J.; Smits, M. (Eds.). Foreign Aid and the making of Democracy in Nepal. Lazimpat, Kathmandu: ActionAid International Nepal, pp.129-138.

Ministry of Finance (2018). Development Cooperation Report. Ministry of Finance, Government of Nepal, Kathmandu, Nepal. December. Accessed August 28, 2019.

Nepal Economic Forum (2019). Nepal Budget for Fiscal Year 2019/20. Accessed August 23, 2019.

Pandey, K.B. (2017). “Foreign Aid in Nepal.” Economic Journal of Development Issues. 23(1-2), pp.71-76.

Pattisson, P. (2017). “Aid agencies accuse Nepal government of hampering their work.” The Guardian, April 19.

Pokharel, P. (2019). “Role of Foreign Aid In Nepal’s Development.” The Rising Nepal.

Sangroula, Y. (2018, July 1). Yasta NGO/INGOs Banda Garnuparcha (T.Yatri, AP1). Retrieved from

Sharma, K. (2011). “Foreign Aid, Governance and Economic Development in Nepal.” Asia Pacific Journal of Public Administration. Volume 33(2), January, pp. 95-115.

The New Humanitarian (2013). “Politicians, donors question donor neutrality in Nepal,” The New Humanitarian, February 26. Accessed August 30, 2019.

Tiwari, G. (2005). “Over 12 PC Donor-Aided Development Projects Fail.” The Himalayan Times, January 21. Accessed September 9, 2019.

Warner, M. (2017). “Cut Foreign Aid to Help the World’s Poor.” Foundation for Economic Education. October 10. Accessed September 11, 2019.


Raj GC

Raj GC is a PhD candidate in the Planning, Governance and Globalization (PGG) program in the School of Public and International Affairs at Virginia Tech. Raj earned a Master of Science (MSc) degree in International Land and Water Management with a specialization in integrated water management from the Wageningen University in the Netherlands in 2010, where he served as a Netherlands Fellowship Program Fellow. He obtained a Bachelor's degree in Agricultural Engineering from the Trubhuvan University of Nepal in 2005. His doctoral research focuses on the productive use of rural water systems, related policy issues and sustainability concerns. Raj is passionate about bringing positive and sustained social and economic change to Nepal’s rural communities through a rights-based approach to development.

Publication Date

September 12, 2019