KATHMANDU, Jan 24: In the second last pre-NDF (Nepal Development Forum) consultation meeting held here today, experts deliberated on the newly issued Foreign Aid Policy (FAP) by the government.

Presenting a paper on the policy, Dr Bimal Kiorala, Secretary at the Ministry of Finance, said that the policy has been brought to strengthen the government?donors relations to enhance the outcome of the donor-funded projects effective technology transfers.

He also said that Nepal is compelled to seek and accept aid to bridge the gap between revenue and expenditure. He added that conflicts in interest between the government and the donors do arise at times.

"In some cases, donors funding do not match the local demand, resulting in low outcome of the projects," he said.

He also said that cost and time overrun and the huge gap between the donors' commitment and actual receipt are the some of the main problems faced by development projects. He also warned that soaring debt could one day bring a major problem to the economy.

Admitting that are some serious lackings resulting in the poor performance of projects, he said that government has come up with reform programmes aimed at optimal utilisation of resources by controlling misuse of funds.

Presenting the donors' prospective on the FAP, Ingrid Otstad, Ambassador of Norway to Nepal, said that the donor community warmly welcome the policy that redefines the relationship between the government and donors.

She said donors' participating in the consultations on the Tenth Five Year Plan (TFYP), the Poverty Reduction Strategy Paper (PRSP), and the Medium Term Expenditure Framework (MTEF) would promote transparency. TFYP, PRSP and MTEF are the main documents that the government would present at the NDF meet scheduled for February 4-7, 2002.

She also said that donors fully support the government documents and will review their assistance strategies in line with these frameworks. "The donors will take specific steps to eliminate corruption and misuse of funds in the donor-funded projects," she said.

Stressing that Maoist insurgency may be a reaction against poverty, unemployment, poor public services and corrupt practices in rural areas, she said the donors are considering for short-term support to the government.

Commenting on the paper, Dr Dilli Raj Khanal said that though foreign aid plays an important role in stimulating development activities, the government's growing dependency on foreign aid in recent years is of prime concern.

He also said that the government has failed to control non-development public expenditure and urged for corrective measures in that direction.

He said that the government should speed up the decentralisation process to maximise the participation of the beneficiaries by involving them in the decision-making process.

Dr Shankar Sharma, Member of the National Planning Commission (NPC), expressed concern over the declining flow of aid and growing competition among the poor countries to attract aids from developed nations. He stressed that Nepal should concentrate on optimum utilisation of the available funds.

"Some of the projects funded by donors do not match with national priority while conditions set by them in some are unpractical," he added.

Kamal Thapa, leader of the Rastriya Prajatantra Party, said that greater decentralisation is the best way to ensure proper utilisation of foreign aid. He also said that the government should also take step to correlate various programmes of NGOs and INGOs with the national priority projects.

Kenichi Ohashi, country director of World Bank, said that MTEF is a step taken in the right direction, which will speed up effective implementation of various anti-poverty programmes.

He also admitted that there have been some shortcomings on the donors' part, particularly in institutional building. He also urged that the government should not undermine Technical Assistance as it brings valuable knowledge, which is often more important than money.

Speaking from the chair, Finance Minister Dr Ram Sharan Mahat expressed satisfaction over the initial response of donors on the newly issued FAP.