From its modest appearance in the early 1950s, foreign aid has grown to form an integral part of the development process in Nepal, and it is amazing to note how remarkable this transformation has been. For the first five years, from 1951-1956, Nepal received NPR 95 million in aid, all in the form of grants. Four decades later, in fiscal year 1994/95, total foreign aid receipts stood much higher at NPR 12.3 billion. The latest budget, for fiscal year 1996/97, puts the estimated receipt of foreign aid at NPR 20.3 billion or 35% of total government expenditure of NPR 57.5 billion.
So far, Nepal has received more than three billion dollars in foreign aid (an average of about 92 million dollars a year since 1951). In what forms has this come, and how has it been distributed? The tables presented in the following page, with data culled from many different sources, attempt to give a clearer picture of the evolution of foreign aid in Nepal.
The first table contains data on the amount of aid received by Nepal since 1951. Using the exchange rate for mid-month of July of each year, as given in a 1995 publication of the Federation of Nepalese Chambers of Commerce and Industry (FNCCl), the figures from government documents (in Nepali Rupees) have been converted to US dollars. Official exchange rates have been used for most years. Since the FNCCl document has data for only as early as 1960, exchange rate has been assumed to be constant for the period before that; this is perhaps not that inaccurate, an assumption given Nepal´s fixed exchange rate policy at that time.
Total foreign aid receipts have increased over the years although there have been fluctuations. In his book Foreign Trade, Aid and Development in Nepal (1988), S.R. Poudyal identified the wars in the Subcontinent (Sino-Indian and Indo-Pakistan) for some of the dips in aid in the 1960s. Most of the other recent fluctuations have also had more to do with the external environment than with internal policies.