ADB's Work in Nepal

ADB has strongly supported inclusive growth in Nepal, helping to reduce poverty, lessen gender and social disparities, build infrastructure, develop human capital, transform agriculture, and mitigate disaster and climate change effects.

Nepal’s economy recovered modestly in fiscal year 2022 with gross domestic product rising by 5.8% largely lifted by progress in coronavirus disease (COVID-19) vaccination efforts, which fostered a gradual normalization in economic activity. The steady path to higher growth was supported by accommodative macroeconomic policies, increased hydroelectricity generation, improved manufacturing output, an expansion in construction, and a gradual revival of tourism.

To date, ADB has committed 494 public sector loans, grants, and technical assistance totaling $7.7 billion to Nepal. Cumulative loan and grant disbursements to Nepal amount to $4.91 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 32 loans and 7 grants worth $3.21 billion.

In 2022, ADB committed a $200-million concessional loan to help the Government of Nepal strengthen the equity, quality, and resilience of its school education. The program will help in the implementation of the first five years of the government’s School Education Sector Plan, 2021–2030 in a sector-wide approach supported by eight development partners, including ADB. The bank will provide an additional $1 million technical assistance grant from its Technical Assistance Special Fund and administer the equivalent of a $600,000 grant from the Government of Norway to support capacity building activities and improve the monitoring and reporting capability of the Ministry of Education, Science, and Technology.

ADB is supporting the government with $70 million in financing to improve the livelihood and climate resilience of horticulture farmers in the hilly areas of five provinces. The Nuts and Fruits in Hilly Areas Project, committed in 2022, is boosting the productivity of 30,000 farmer households in Bagmati, Gandaki, Karnali, Province 1, and Sudurpaschchim, mainly by developing around 10,000 hectares of climate-resilient fruit and nut orchards. ADB will administer a $9-million grant from the Global Agriculture and Food Security Program to support 10,000 smallholder farmers in producing irrigated vegetables during the dry season and nutritious food crops during the wet season.

A $12-million ADB grant for the Strengthening Systems to Protect and Uplift Women Project, committed in 2022, will support the government’s response to gender-based violence, strengthening police services by filling gaps in long-term rehabilitation services for survivors, enhancing awareness on gender-based violence, and improving institutional capacity to provide survivor-services. ADB will also administer a $1.5-million technical assistance grant from ADB’s Technical Assistance Special Fund that will be used to ensure quality and timely civil works activities under and for capacity building measures for designing quality and sustained service provision.

Nonsovereign operations. Total outstanding balances and undisbursed commitments of ADB’s nonsovereign transactions in Nepal as of 31 December 2022 was $41.89 million representing 0.33% of ADB’s total private sector portfolio.

Operational challenges. Nepal’s rugged terrain, infrastructure gaps, inadequate human capital, and political and policy uncertainty continue to constrain economic growth and development. The country is highly vulnerable to disasters caused by natural hazards, climate change, and environmental degradation. The impact of COVID-19 has lessened but the risk of newer variants disrupting the country’s recovery remains.

Nepal health workers carry a box containing doses of vero cell vaccine as they travel in Chitepani village in Kaski district, Nepal 19 November 2021. Photo: Narenda Shrestha/ADB

Weak governance has long affected the effectiveness of development assistance to Nepal. The country faces challenges toward ensuring the smooth implementation of federalism. These include limited capacity at subnational levels and slow progress in passing needed legislation and deploying staff, as well as lack of clarity on mandates and responsibilities and coordination among the three tiers of government. Low capital expenditure spending remains a recurrent challenge. ADB-supported projects in Nepal are also affected by start-up delays, poor contract management, high staff turnover, delays in environmental and land clearances, complex social safeguards measures, and disruptions in the availability of construction materials.

ADB is supporting the government to develop and strengthen its capacity to implement projects, procurement, contract administration, and social safeguards through the Capacity Development Resource Center at the Nepal Administrative Staff College. ADB, along with other development partners, is also providing policy support to improve overall public financial management and service delivery at the subnational levels of governments in the federal structure.

Knowledge Work

An important contribution to ADB’s Nepal knowledge work in 2022 is a report examining the learning gleaned from rebuilding smartly after the 2015 earthquake by using several key innovations, such as the use of locally available building materials, the need to create more disaster-resilient communities, and the use of real-time web-based progress monitoring. An ADB study reviewed the progress in regulatory and policy reforms in Nepal and offered recommendations to help refine the country’s fiscal federalism framework according to the provisions of the 2015 Constitution. ADB’s knowledge products for Nepal in 2022 also included macroeconomic updates and analyses of the government’s annual budget statement and monetary policy.

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

Future Directions

ADB’s country partnership strategy, 2020–2024 focuses on three priority areas: improving infrastructure for private sector-led growth, improving access to devolved services, and ensuring environmental sustainability and resilience. ADB will work to reduce costs for businesses, attract private investment, strengthen public financial management, 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. The bank will also continue to work with Nepal to build sound institutional capacities for sector planning, increase project readiness and effective implementation, and ensure sustainable asset management. Future programs include integrated and innovative approaches and a greater focus on climate change adaptation and mitigation.

Last updated: 18 May 2023