A Loan Agreement was signed today in Kathmandu between the Government of the Republic of Nepal and the Kuwait Fund for Arab Economic Development whereby Kuwait Fund will make a Loan in an amount of KD. 5,000,000/- (equivalent to about US$ 17 million) to assist in the financing of the Irrigation Systems Improvement Project (in Eastern and Central Regions of Nepal).

The Loan Agreement was signed by Mr. Madhu Kumar Marasini, Joint secretary Ministry of Finance, on behalf of the Republic of Nepal, and Mr. Hamad S. Al-Omar, Deputy Director-General of Kuwait Fund for Arab Economic Development on behalf of Kuwait Fund, in attendance of Mr. Waleed Al-Bahar, Regional Manager for East South Asia & Pacific Countries in the Kuwait Fund.

The project aims at contributing to the socio-economic development in the Central and Eastern Development Regions of Nepal and the country, at large, through rehabilitating and extending existing Farmer Managed Irrigation Systems (FMISs), which will secure adequate irrigation water, and henceforth, increase and sustain agricultural production for approximately 7,600 hectares of agricultural land, thus contributing towards poverty reduction for the project area inhabitants in addition to contributing to national food security.

 The project comprises the civil engineering works required for improving the irrigation infrastructure of approximately 50 FMISs through rehabilitation and concrete lining of approximately 340 kilometers of irrigation canals; construction of approximately 2,050 weirs, intake structures and small hydraulic structures, in addition to all complementary work; improving the irrigation systems management, and improving the agricultural practices. Moreover, the project includes institutional support and consultancy services. The Project is expected to be completed by the end of 2020

The total cost of the project is estimated at about 2252.5 million Nepalese Rupees, equivalent to about KD. 6.8 million, of which about 96 million Nepalese Rupees, equivalent to about KD. 0.3 million representing about 4.3% will be in foreign currency. The Kuwait Fund Loan will cover about 73.2% of the total cost of the project including all the foreign exchange cost. 

The Loan is made for a term of 26 years including 6 years grace period.  The loan will be amortized in 40 semi-annual installments, the first of which will be due on 1st date on which any interest or other charge on the Loan shall fall due after the elapse of the above mentioned grace period. The Loan bears an interest rate at1.5% per annum, in addition to 0.5% per annum to cover administrative costs and other expenses incurred in the implementation of the Loan Agreement.

This loan represents the six loan by Kuwait Fund to the Republic of Nepal as the Fund already made 5 loans to the Republic of Nepal with a total amount of Kuwait Dinars 16.4 million (equivalent to about US$ 55.76 million) for the financing of four projects in the power and irrigation sectors.  The Fund also provided to the Republic of Nepal 2 technical assistances amounting in total to about KD. 275 thousand (equivalent to about US$ 935 thousand) for the preparation of technical and economic feasibility studies for two projects in the Transport and Agriculture sectors.