Nepal to receive $110 m climate loans despite protests
The government will implement five projects with 110 million dollars sanctioned by the controversial Climate Investment Funds (CIFs), ignoring protestors who say this least developed country merits grants rather than climate loans.
The money – 50 million dollars in grants and 60 million in credit – will be disbursed through the Asian Development Bank, International Finance Corporation (IFC) and the World Bank through four years as the projects start early next year, Nepal’s environment secretary Krishna Gyawali said.
Nepal is among eight developing countries that were offered CIFs, under either the Clean Technology Fund or the Strategic Climate Fund (SCF). Other potential CIF recipients were Bangladesh, Bolivia, Cambodia, Mozambique, Niger, Tajikistan and Zambia.
In May 2009, Nepal’s first Maoist government agreed to participate in the pilot programme for climate resilience (PPCR) developed under the SCF.
Besides the environment ministry, the nodal agency for implementing the projects, other stakeholders include relevant ministries, the National Planning Commission and the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
In 2010, a new government led by the Communists identified four priority areas where the funds would be spent.
Building climate resilience of watersheds in mountain eco-regions is top priority. It will focus on communities living in watershed areas significantly vulnerable to climate change.
A second priority is responding to climate-related hazards through early warning systems as well as developing insurance.
The other two components are mainstreaming climate risk management in development, and building climate-resilient communities through private-sector participation.
Later, on Nepal’s request, a fifth project was added to build the climate resilience of endangered species.
However, several non-governmental organisations, trade unions, legislators from ruling parties and civil society members are campaigning against the climate loans, saying they add insult to injury.
“Developed countries must provide unconditional financial support on adaptation to countries vulnerable to climate change to build their resilience,” an IPS report said quoting Keshab Thapa, programme coordinator at Local Initiatives for Biodiversity, Research and Development.
Thapa says climate loans violate both the U.N. Framework Convention on Climate Change, where developed countries have committed adaptation support to vulnerable countries, as well as Nepal’s own policy on climate change, the National Adaptation Programme of Action (NAPA).
With NAPA requiring 80 percent of the funds of any adaptation programme to flow directly to the community level, the PPCR in Nepal, Thapa says, violates the principle of country and community ownership.
He also objects to the private-sector participation component, to be effected through IFC and FNCCI.
“The PPCR proposes to lend money to private-sector companies which will never achieve community resilience,” he told IPS. “Private companies are often happy to use the loan money for their own benefit, simply looking at the scheme of interest and repayment; they are often totally unaware of climate change, adaptation, resilience, and the principle of equity and justice.”
With Nepal being at medium risk of debt distress and spending eight percent revenue to repay foreign debts, protesters say climate loans will burden the taxpayer with additional debt.
“We petitioned two earlier prime ministers against taking climate loans and are following it up with the current one,” says Hari Parajuli, secretary of the All-Nepal Peasants’ Federation, an umbrella of 22 organisations that has participated in public rallies against the PPCR.
“Nepal has one of the lowest greenhouse gas emission levels in the world due to its low industrialisation,” Parajuli adds. “It also has forests covering nearly 40 percent of its land. Yet, the developed countries that cause pollution are now seeking to make Nepal take loans and pay them interest.”
Parajuli says the protests are also against the involvement of the World Bank.
“We don’t regard it positively,” he says. “It is not service-oriented but works for profit.”
The growing corruption charges against ministers and government officials have also fuelled fears about the climate loans.
“Past precedents make us fear that new loans may not be utilised properly,” says Madan Lal Shrestha, academician at the Nepal Academy of Science and Technology. “Before taking a new loan, the old ones should be reviewed first.”
A parliamentary committee on finance and labour relations has also criticised the government, saying it should ask for grants, not loans.
The World Bank, one of the targets of public criticism, says it is merely the fund disbursal instrument.
“Whether or how the available resources are used to address urgent financing and knowledge gaps is entirely up to Nepal,” says Christine Kimes, the Bank’s acting country manager for Nepal. “Concerns regarding climate financing in Nepal should therefore be discussed with the government.”
As for the government, officials defend the decision to take the loan.
“The apex body on climate change, the Climate Change Council headed by the prime minister, approved of the funding, provided it was used on priority sectors like agriculture, biodiversity and renewable energy to enhance productivity,” says Gyawali. “Besides, it is a remarkably concessional loan.”
The 60 million dollar loan has to be repaid in 40 years with a 10-year grace period. Also, Gyawali says, there is no interest, only a 0.10 percent service charge to be paid semi-annually.
But the protesters say they have not given up.
“Civil society organisations will closely monitor the use of the PPCR grant and loan,” says Thapa. “They will also continue lobbying to prevent further climate loans.” –IPS