Trend and Patterns of US AID in Nepal (FY1990/91-FY2017/18)

Abstract

Foreign aid can be defined as economic aid from one country to another, the beneficiary typically being a less developed country (LDC). Foreign aid is required for the economic development and growth of the country. Lack of enough capital formation in the country is the main problem for economic development of the underdeveloped country. The developed countries have been providing assistance to the less development countries by providing aid through various medium and agencies. The study is concerned with the trend and patterns of US aid to Nepal. The study aimed at examining the effect of US aid on GDP in Nepal. The study is descriptive aswell as analytical type and focuses on trend, magnitude, composition and concentration of US aid. The regression, correlation, hypothesis testing are done according to the given sets of data using SPSS software. The study is related to the analysis of Trend and Pattern of US Aid in Nepal(FY1990/91-2017/18). The study shows that USA aid to Nepal duringFY1990/91-2017/18). is Rs.1084864 millions.The US aid occupied 7.1% of the total aid in Nepal. Likewise,US aid has covered an average of 0.35% in the total GDP of Nepal.The total USA grants reached cumulative Rs.438785.4millions and the total USA aid loan reached cumulative Rs.346804.6 millions in the 16 years period from 2003-2017.The volume of USaid to Nepal is rising taking a pattern of decreasing and increasingthrough out the study period. The study tries to explain the USaid commitment anddisbursement situation in Nepal. TheUSaid commitment reached Rs.785590millionsand theUS aid disbursement reached Rs. 399108.4millions. The disbursedUSAamount is only49.70% of the total aid commitment. US is providing aid in almost every sector in Nepal. Theareasof US aid assistanceincludes food security, natural resource management, health and education,democracy and governance, disaster risk reduction , resilience and reconstruction.From this, we can see that the contribution of theUSaid to Nepal is vital for theeconomic development of the country. v The study tries to see the impact ofUSaid on the GDP of Nepal.The impact of USaid on GDP is found to be positive and significant. Using regression analysis,Ifoundthat there is positive correlation between US aid and GDP. The Pearson’s coefficientis 0.944 which implies that there is positive relation between the independent anddependent variables. The value of R 2 is 0.891 implying that predictor US aid accounts89.1% variation in the total GDP. The value of F-statistic is 180.594, which thecritical value of F is 4.30 at 5% level of significance which indicates that R is statistically significant. That is the estimated equation is significant. Likewise, the slope of US aid inflow is 48.206 which indicate that there is positive relation between GDP and US aid. This implies that when total US aid inflow increases by 1 million GDP increases by 48.206 millions. The history of foreign aid to Nepal shows that the donors of Nepal have been implicitly expressing and lobbying their political and economic motives to the GoN.The GoN should be careful while accepting foreign aid. The GoN should always accept foreign aid as per the needs and national priorities. There should be better utilization of foreign aid because aid today adds liability to the future generation.