Kathmandu: The World Bank has raised the interest rate on its development loans to Nepal effective from July 2025.
This change was confirmed by Dhaniram Sharma, Joint Secretary at the Ministry of Finance and head of the Foreign Aid Coordination Division.
According to Sharma, the interest rate on concessional loans that Nepal has traditionally received from the World Bank has been doubled from 0.75 percent to 1.5 percent.
“The World Bank has increased the interest rate starting this July. These are loans we usually repay over 40 years. Now, the maturity period has been standardized to 30 years, with a six-year grace period included,” he explained. Previously, Nepal had two types of maturity terms—38 years and 40 years.
Sharma stated that the rise in interest rates is a direct consequence of Nepal’s graduation from the list of least developed countries (LDCs).
“The reason is simple—we’ve become wealthier. We were in the lowest category of poor nations, and now we’ve moved slightly higher. That’s why the interest rate increased,” he said.
He further added that with the World Bank and Asian Development Bank (ADB) introducing their respective strategic frameworks, Nepal will align its development assistance with those strategies.
“The World Bank introduced the ‘Country Partnership Framework’ while ADB rolled out the ‘Country Partnership Strategy’. Both documents were developed in collaboration with us, and the aid will now move forward based on the priorities outlined in those strategies,” Sharma noted. These two multilateral lenders together contribute approximately 80 percent of Nepal’s development aid.
To improve the effectiveness and selectivity of foreign aid, Sharma said that Nepal has introduced a “Project Readiness Filter”, which will ensure that only high-quality, results-oriented projects are approved.
“Some ministries that used to freely apply for any number of projects might no longer be able to do so. The previous tendency of seeking too many projects at once will now be restrained,” he said.
He also emphasized that foreign aid cannot be implemented unilaterally and must be based on mutual agreement between Nepal and the donors.
“There have been criticisms regarding where the aid is allocated. People say we should get funding for our priority areas—but without mutual negotiation, that’s not possible,” he added.
Since all aid agreements are finalized through negotiation, it’s not always feasible for Nepal to receive assistance strictly on its own terms, Sharma clarified.
“This is entirely negotiation-based. Our effort is to align the aid with our national priorities, but the outcome depends on what both sides agree upon,” he concluded.
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