After a decadelong civil war which ended in 2006, Nepal remains vulnerable to economic, social, political and environmental instability. While the Nepalese economy has improved in recent years, the country’s economic progress is largely attributed to a surge in remittances from overseas workers. Analysts cite a shortage of domestic employment opportunities which has led to social inequalities and exclusion. Furthermore, most international development agencies, including the U.K. Department for International Development, place Nepal in the list of countries most vulnerable to climate change and natural disasters.


The Nepalese government response to these challenges has been insufficient and often hampered by the political situation in the country. The peace process following the civil war has integrated the Maoist party into mainstream politics and initiated a difficult shift from monarchy to federalism. The country’s still immature institutions have faced difficulty implementing sustainable political and economic reforms that would help Nepal take advantage of foreign aid and development assistance.


As a key development partner, DfID acknowledges Nepal’s important role in trade and economic development as it serves as a transit route between India and China. To help Nepal realize its potential, DfID is dedicating its resources to building a more durable peace in the country and responding to the threat of climate change through clean energy programs.


Funding levels


For the period 2011–2015, DfID has allocated a total of 331 million pounds ($533.27 million) in aid to Nepal. On average, the agency will spend 82.75 million pounds per fiscal year during this time period.



DfID intends to channel its aid through a combination of different aid instruments, including budget support, partnering with multilateral institutions and providing grants to nongovernmental organizations and the private sector.


Funding priorities (fiscal years 2011-12 to 2014-15)


In line with the U.K. government’s Structural Reform Plan — a framework used by DfID to bolster its transparency and accountability, thereby increasing value for money — U.K. aid will focus on governance and security, health (maternal and child mortality), inclusive wealth creation, and measures to address climate change. More specifically, DfID’s priorities in Nepal are:

  • Providing support to the ongoing peace process.
  • Strengthening governance.
  • Improving security and access to justice.
  • Ensuring growth for the benefit of the poor and excluded.
  • Increasing access to health and education.
  • Mitigating the effects of climate change and natural disasters.
  • Improving the lives of women and girls.



Since aid delivery to Nepal began, the top three sectors which have received the most funding from DfID are (1) health (93.13 million pounds), (2) government and civil society (63.77 million pounds), and (3) conflict prevention/resolution, peace, and security (48.46 million pounds).


Currently, two of the three largest DfID projects in Nepal are health related: Support to Nepal Health Sector Programme II (55.2 million pounds) and Health Sector Program (32.82 million pounds). A third significant DfID project in Nepal is the Nepal Peace Support (33 million pounds).


Devex analysis


Nepal is one of DfID’s 27 focus countries. While DfID provided approximately 50 million to 60 million pounds per year since 2008, this average is expected to increase significantly through 2015 and beyond.


A lack of government capacity in Nepal serves as one of the most serious challenges to effective aid delivery and development program implementation, yet DfID remains dedicated to leveraging government systems for most health, education and local governance programs and will continue to do so over the next four years. The agency will also explicitly focus on building the capacity of public financial management institutions to absorb increasing funds.


In an effort to achieve value for money — a core theme for U.K. aid — DfID has adopted a flexible approach to program design and selection of high-quality delivery partners for specific sectors. DfID plans to continue working with the United Nations on peace building, both through the U.N. Peace Trust Fund, complementing the government’s Nepal Peace Trust Fund, and by providing support to the U.N. Resident Coordinator’s Office.


DfID also plans to work closely with other donors, including the U.N. Development Program for matters relating to elections, UNICEF for paralegal committees and the World Bank for public financial management. DfID will also collaborate directly with the Swiss Development Corp. to support the Nepalese forestry sector and the private sector to promote investment in the agricultural, tourism and forestry sectors.



DfID Nepal

P.O. Box 106

Tel.: (977-1) 554-2980

Fax: (977-1) 500-0179

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