Nepal uncertain as US halts aid

Nepal is facing uncertainty as the United States halts new foreign aid, except for military assistance to Israel and Egypt.As Nepal’s largest bilateral donor, the US has long been a key partner, funding major projects through USAID and the Millennium Challenge Corporation (MCC). However, government officials are unsure whether already approved projects will be affected or if only future initiatives will face setbacks.

“It is unlikely that aid for approved projects will stop, but new projects might be impacted,” said an official from the Ministry of Finance.

Under a 2022 agreement, USAID had committed $659 million in aid through 2027, with a focus on sectors like education, health, and economic development. The MCC had also been working on upgrading transmission lines and the East-West Highway, with an additional $50 million recently added to its assistance.

In the health sector, US aid plays a crucial role in strengthening systems, training health workers, and improving sanitation. Recent initiatives include a $6.75 million grant for the International Health Security Program to tackle infectious diseases.

The US decision follows a global instruction from Secretary of State Marco Rubio to stop all new foreign aid, except for emergency food assistance. With the US contributing $60 billion in foreign aid in 2023, Nepal is now contemplating how to adjust its budget for the fiscal year 2025/26 if the expected aid fails to materialize.

“Without new aid, we’ll have to revise our budget plans,” said Mahesh Bhattarai, spokesperson for Nepal’s Ministry of Finance.