ADB President suggests govt to increase capital expenditure

Visiting Asian Development Bank president Takehiko Nakao Thursday suggested the government to increase capital investment to fill the infrastructure gap.

“Nepal’s public capital spending has been low at an average of 3.5 per cent of gross domestic product (GDP) over the last 5 years compared to the 8-12 per cent required to fill the critical infrastructure gap within a decade,” Nakao said in a meeting with Prime Minister KP Sharma Oli.

He said that it’s essential to accelerate the pace of investment for reconstruction and other development programs in order to achieve its economic growth potential for 7-8 per cent per annum in the medium term. 

Nakao, who arrived her on Wednesday, met with PM Oli and Finance Minister Bishnu Prasad Paudel and discussed Nepal’s economic recovery and social development after the devastating earthquakes last year.

During his meetings, Nakao said that the bank was willing to expand annual lending to Nepal by 70 per cent to 500 million USD per year from the current 300 million USD to support critical investments and reforms.

“Under it’s country partnership strategy with Nepal for 2013-17, ADB is prioritizing major investments in hydropower generation and transmission, enhancing the capacity of international airports, building new economic corridors to promote regional trade, and reforming higher education systems,” ADB’s Nepal office said.

It said that the bank would continue its support for inclusive growth through investments in agricultural diversification and productivity, urban and rural water supply and sanitation, and rural roads.

ADB forecasts Nepal’s economy to grow by 1.5 per cent in the current fiscal year after 3 per cent growth in the previous year.

Nakao praised Nepal’s enactment of its new constitution as a major milestone in its political transition process.

“The new constitution marks a new era for Nepal and lays the foundation for lasting peace, stability, and more rapid socio-economic progress. I hope the remaining political differences over the new constitution will be amicably resolved soon, paving the way for its timely implementation,” he said.

He said that ADB was ready to provide assistance for Nepal’s transition to the new governance structure and public management systems as envisaged in the constitution.

Nakao said that the government and ADB should work together to speed up project implementation, including by promoting timely and proactive decision making by project implementing agencies.

The bank said that a large portion of ADB’s currently committed assistance of 1.75 billion dollars remained unspent.