Continued assistance will depend on demonstrated commitment and capacity to implement reforms: WB

March 9, 2005
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The World Bank (WB), in a statement from Washington D.C. said it has advised its board of Executive Directors there that more time would be needed to make a “ground-level assessment” of whether the environment in Nepal would allow for the continuing implementation of ongoing projects.

World Bank Country Director for Nepal Ken Ohashi, summoned to Washington D.C. to brief the board at the end of February, told the board: “We deliberately took a ‘wait and see’ stance, not making any public statements or seeking meetings with the Ministers for the first three weeks. It was designed to give the new cabinet the space to demonstrate how it was going to approach the development agenda, rather than crowding that space with our ideas and advice.”

Ohashi said the Bank will watch whether the new government demonstrates — through action — commitment to the country’s development vision as expressed in the Poverty Reduction Strategy (PRS) and the associated reform agenda. He said the Bank will also watch whether the government can implement the many development activities envisaged in the strategy and, most critically, improve service delivery.

“If there is commitment and capacity, there is a basis on which to believe World Bank assistance will be utilized well. We expect in the next 1-2 months, the government should be able to demonstrate its stated commitment through its actions,” he said.

Ohashi informed the board that management does not intend to process the Second Poverty Reduction Strategy Credit (PRSC II), a proposed second tranche budget support operation, during the current Nepali fiscal year which ends on July 15. “The agreed reform actions, to underpin PRSC II in FY05, have not been completed, and there is not time to process PRSC II in FY05 now”, he said.

The Bank’s lending operations are closely linked to macro-level as well as sector-level reforms, which are now tied together coherently in the Tenth Plan or Nepal’s PRS.

Ohashi also said it is too early to speculate whether the Bank should consider PRSC II next fiscal year. “Besides the acceleration of reforms and effective implementation, with the changed security situation, we also will have to assess closely the evolution of public expenditure patterns in FY06,” he said.

The WB statement said the board expressed concerns about the security situation in Nepal, the implementability of projects and about the government’s ability to continue implementing difficult reforms in the absence of representative mechanisms to build broad based consensus. But it broadly supported the cautious approach proposed by management.

The statement added that the Vice President for the South Asia Region, Praful Patel, underscored the critical importance of working in close collaboration with all development partners over this challenging time.