Many countries in the world have taken foreign loans. Foreign loans are taken for development and economic and social development of the country. Analysts believe that if such loans taken in the name of increasing the country's economic growth are not utilized properly, their impact will be negative in the future.

There are examples of countries in the world that have become economically weak due to the problem of taking loans but not being able to repay them. The principal and interest must be paid from the amount of profit received from the loan investment. The issue of the return on investment made by underdeveloped countries at low interest rates not being fruitful for the country and the people has been raised for years.

Even if we leave aside the Panchayat era in Nepal, questions have been raised over the past three and a half decades not only on foreign loans but also on the mobilization of internal resources.

After the political change of 2046, it seems that the loans and grants provided by donor agencies are increasing due to the economic liberalization and policy clarity of the government. But the question of how much of it has been utilized and whether it is necessary to take a loan to pay the principal and interest has also been raised from time to time.

On the one hand, there is no limit on how much foreign loans can be taken, and since the value of the US dollar keeps increasing, the problem of increasing the principal and interest on the loan is the same.

About three decades ago, i.e. until the fiscal year 053/054, there is data that Nepal had foreign loans of around 160 billion. In the Panchayat, i.e. before 047, the loan was 38 billion. The National Bank had presented data that the amount of loans taken had increased due to the increase in the value of the dollar and had almost doubled. At that time, it seems that only 5 percent of the national income, i.e. 9 billion rupees per year, was being paid in interest.

For the first five-year plan of Nepal, which started in 2013 BS, a loan of 380 million rupees was taken. At that time, donor countries used to provide grants rather than loans to developing countries as a humanitarian measure. At that time, there were 70 percent grants and 30 percent loans. But by the 1950s, grants were 30 percent and loans were 70 percent. At that time, Nepal's annual budget was based on 55 percent foreign loans and grants.

Concerns over the utilization of loans

Concerns about the utilization of foreign loans had begun since the 1950s as foreign loans were increasing. At a program organized in Kathmandu on 15 Mangsir, 2054, economists and officials of the National Bank argued that foreign loans should not be used unfairly even for future generations.

They expressed concern about whether the loans taken were properly utilized. The debate is still growing. In that context, economist Dr. Yubaraj Khatiwada had expressed the view that foreign loans were not being utilized in a way that would provide justice to future generations. He said, ‘If we want to provide justice to future generations, foreign loans should be invested only in productive sectors and projects necessary for the nation.’

Former Planning Commission member Dr. Balgopal Baidya had expressed concern about the utilization of foreign loans. He had said, ‘Foreign loans should be invested in appropriate places, so that future generations can also get good returns.’ Baidya had said that the wealthy class should not use loans in the name of traveling abroad and sending their children abroad. Economist Dr. Gunanidhi Sharma had said that there was a lack of honesty in the policy of loan utilization. He had commented that future generations should not be made unable to rise due to foreign loans.

Donor pressure along with loans

The situation where donors not only give loans, but also have to comply with their conditions was not only now, but also then. That is why economists used to say, ‘The loan is ours, the driver is someone else.’ The ratio of loans and grants that Nepal received during the Fifth Five-Year Plan had collapsed in the 1950s. Because, donors had started emphasizing loans over grants. They had embraced the trend of using their business, technology and human resources along with low-interest loans. On the one hand, questions were raised about the availability of foreign loans because they had to increase loans over grants and also have to comply with their many conditions.

At that time, according to the report of the Auditor General’s Department, it was mentioned that there was a situation where foreign loans and aid had to comply with their conditions. The report also mentioned that a provision had been made for the appointment of technical advisors from donors. The government was seen spending 40 percent of the total cost on roads, 37 percent on irrigation, and 39 percent on tourism on such consultants. Although Nepal's law required only 3 percent to be spent, it was not implemented.

There was no such law abroad. According to government officials, the consultant's expenses did not include the purchase of expensive vehicles and luxury goods. Moreover, there was a provision that technical equipment should be purchased from donors. Dr. Khatiwada commented, 'When using foreign loans, a Nepali had to be in the driver's seat.'

The tendency to increase the cost of projects

On the one hand, the selection of projects was done by donors, and on the other hand, the problem of delaying construction and increasing costs was a trend. The problem of projects failing under pressure from donors was also a problem. Dr. Khatiwada had asked, ‘Why should we pay for a failed project that we ourselves could not choose and implement?’ The Accountant General’s report had mentioned that the deadline of projects financed by foreign loans had been extended up to 10 times and that some projects had failed. The report had made public an example of a consultant appointed for 6 months working for 63 months. Due to which the cost of the project had increased drastically.

Foreign debt is like a tree without roots

According to a report prepared by the United Nations Development Programme in 1994, it had suggested a change in policy regarding loans to developing countries. But it was not implemented. The report stated that if the donor agencies did not change their policies, the loans would not be justified. The report said, ‘Foreign debt is a tree without roots of beautiful flowers, which can fall at any time.’ The report prepared by independent experts from around the world mentioned that donor agencies provide loans for undemanding issues, that the borrowing country has no control over the utilization, and that along with the loans, the technical manpower and technicians of their own country are forced to be bought. But the donor agencies did not implement the sentiments and conclusions in the report.

Experts had suggested that if foreign debt is stopped, the country’s future will be ruined and that it should be used in productive sectors. Dr. Vaidya, on the other hand, pointed out the need for political commitment to utilize the debt. He said that if there is political commitment, the bureaucracy will not be able to work according to its own interests.

How is the foreign aid received by Nepal three decades ago being spent? Has it been utilized properly? What are the problems? What can be the solution? The news prepared by journalist Hari Bahadur Thapa, encompassing the country's situation and the arguments put forward by experts, was published by Kantipur Daily on 16 Mangsir 2011 under the title 'Foreign Debt: Injustice for Future Generations'. In the fiscal year 2011/12, the foreign debt was 160 billion.

As of the first quarter of the current fiscal year, i.e., the fiscal year 2012/13, the foreign and domestic debt has reached about 2724 billion.65 billion. During this period, the domestic debt was about 1278 billion and the external debt was 14.5 trillion. According to the budget statement of the Ministry of Finance for the fiscal year 2012/13, the country has to pay 375 billion.24 crore or 19.1 percent of the total budget annually towards financial management.

A situation has arisen where a large amount of money has to be spent every year on the principal and interest of internal and external debt. But questions have been raised about its benefits from time to time.