KATHMANDU, MAR 26 – Aid disbursement depends on absorption capacity Japan resumed providing yen loans, known as Overseas Development Assistance (ODA), to Nepal with a Rs 14.168-billion soft credit for the Tanahun Hydropower Project after a 12-year break. Masataka Nakahara, director general of the South Asia Department of the Japan International Cooperation Agency (JICA), was recently in Nepal to sign the loan agreement. The Kathmandu Post caught up with Nakahara to talk about the resumption of yen loans and JICA’s future assistance. Excerpts:
What is the purpose of your visit?
We have been discussing with the Nepal government new Japanese yen loan packages for solving the energy crisis in Nepal. Hence, my visit this time was to sign a loan agreement on the Tanahun Hydropower Project. This is a very important milestone. I also met senior government officials during my visit to discuss various issues related to JICA’s ongoing projects.
That means the Japan government has resumed yen loan packages to Nepal?
Yes. The last yen loan assistance was for the Melamchi Drinking Water Project, which was almost 12 years ago. Finally, we have resumed issuing loans after 12 years. The assistance for the Tanahun project is from the yen loan package.
Since Japan has agreed to resume yen loans to Nepal, what would be the future areas of assistance from JICA?
I think physical infrastructure will be our first choice. But JICA will not be the only one to do everything. We need collaboration with international financial agencies such as the World Bank, IFC and ADB.
Is JICA satisfied with the way Nepal has utilized Japanese assistance?
The previous yen loan was for the Melamchi Water Supply Project. But the project is far behind schedule. That should be addressed. It should be a priority for both the sides to put the process on track. Yen loan packages require a very transparent process.
With the resumption of yen loans, will there be a change in JICA’s priority with regard to assistance to Nepal?
There will not be a big change. We have already discussed with the government about a strategic dialogue to identify which sectors need assistance. Based on this dialogue, we will take the next step. At this moment, it’s too early to say when JICA will provide the next yen loan.
It seems JICA has given greater priority to other South Asian countries. Why hasn’t it provided the same level of assistance to Nepal?
We watch very comprehensively the country’s situation, economic and political. Political stability is essential for JICA to convince the Japanese government. Otherwise, it will be very very difficult.
One of the major concerns of donors is the Nepal government’s ability to utilize aid. What do you have to say on this?
I expect improvement in the aid absorption capacity of the Nepal government. For example, we provided a yen loan to Melamchi. But there has been slow disbursement of the loan to the project. Disbursement is directly related to the absorption capacity of the country receiving the assistance. If the absorption capacity is poor, we will likely be more reluctant.
Source : The Kathmandu Post