“Trend Composition and Impact of US Aid on Economic Growth of Nepal”

Abstract

Background: Foreign aid is the donations of money, goods, or services from one nation to another. Such donations can be made for a humanitarian, altruistic purpose, or to advance the national interests of the giving nation. Aid can be bilateral or multilateral. Bilateral aid is usually in the form of conditional aid in which the recipients get support from the donor country. This study “Trend Composition and Impact of US Aid on Economic Growth of Nepal” tries to analyze the trend and impact of Us aid in Nepal. Materials and Methods: This study is cross-sectional and analytical and is completely based on secondary data from FY1990/91 to FY2020/21. To examine the trend and impact of foreign aid on the economic growth rate of Nepal simple regression model were used. The coefficient of determination R 2 and test of significance were calculated. For the level of significance of 5 percent, the p-value for the US aid was obtained to be less than the level of significance which suggested that there existed a significant relationship between US aid and the GDP of Nepal. Result: Over the 30 years, the total assistance amounted to US$ 850.28 million corresponding to 48.27 percent of the total US aid. Grants amounted to US $ 871.46 million corresponding to 49.74 percent of the total US assistance. Loans totaled US $ 30.44 million which is equivalent to 1.99 percent of the US aid. US aid has helped Nepal in various fields including agriculture, health, sanitation & family planning, natural disasters, education, energy, economic growth, trade, and other. The R 2 value for the US aid and the GDP of Nepal was found to be 79.76 percent which signified that US aid could be one of the factors whose change might contribute to a change in the GDP of Nepal. Conclusions: In developing countries like Nepal, adequate mobilization of internal resources could not have been possible without foreign aid to accelerate economic growth and development. The function of foreign aid is to enable the developing countries to make a transition from economic stagnation to self-sustaining economic growth. Among the various projects under foreign aid, few of them are successful to fulfill their indicated aim but in general, they have been less effective in bringing the required amount of economic growth. Keywords: GDP, Economic growth, Regression, Trend, US Aid,