Kathmandu expects over $2 billion in loans and grants from Delhi

Nepal wants India to provide a package combining more than $1 billion in lines of credit with about $1 billion in grants. The proposal matters because Nepal needs funding for major infrastructure and reconstruction projects, including damage caused by the August 26 Bhotekoshi flood.

The credit would mainly finance domestic transmission lines and other infrastructure projects. Nepal is also requesting a $500 million grant to upgrade the Siddhartha Highway between Sunauli and Pokhara. Another $500 million, likely as a grant, is sought to rebuild infrastructure damaged by the flood.

Indian Foreign Secretary Vikram Misri is visiting Kathmandu to discuss the proposal before Prime Minister Balendra Shah’s expected India visit. Nepal will formally present its priority-project list. Negotiations are expected to continue, with a possible package announcement during Shah’s visit, although officials said the full understanding may come later.

Nepal’s proposed package is worth more than $2 billion, making it a major request ahead of Prime Minister Balendra Shah’s expected India visit. The money would combine borrowed funds on concessional terms with grants that Nepal would not repay.

More than $1 billion would come through lines of credit. Nepal plans to use that financing mainly for domestic transmission lines and other infrastructure. The grant requests total $1 billion: $500 million for upgrading the Siddhartha Highway and another $500 million, most likely as a grant, for infrastructure damaged by the August 26 Bhotekoshi flood.

The figures describe Nepal’s request, not a final agreement. Indian Foreign Secretary Vikram Misri is expected to discuss the possible scale during his Kathmandu visit. Officials said negotiations should conclude and an announcement could come during Shah’s India visit, but the article also notes that final understanding may take longer.

A line of credit is a financing arrangement that lets a borrower draw money for approved projects and repay it under agreed conditions. A grant is direct assistance that does not have to be repaid. The difference affects Nepal’s future obligations and the total cost of each project.

In this proposal, India would provide more than $1 billion through lines of credit, mainly for transmission lines and other infrastructure. Nepal separately seeks $500 million in grant support for the Siddhartha Highway and another $500 million, likely as a grant, for flood-damaged infrastructure.

Nepal’s former finance minister Rameshwor Khanal said the country cannot rely on grants alone for reconstruction. The article also notes that global grant assistance is declining. A mixed package could therefore provide immediate support while spreading costs between non-repayable aid and loans, though earlier Indian credit was difficult to use because of attached conditions.

The proposed assistance targets infrastructure that Nepal considers important for development and recovery. Transmission lines would receive much of the requested credit, while grants would address a major highway upgrade and damage from a recent flood.

Nepal is seeking more than $1 billion in credit to construct several domestic transmission lines and implement other infrastructure projects. It wants a $500 million grant to upgrade the Siddhartha Highway, which connects Sunauli on the Indian border with Pokhara. A further $500 million, likely as a grant, would rebuild and rehabilitate infrastructure damaged by the August 26 Bhotekoshi flood.

The government was consolidating projects from different ministries before Indian Foreign Secretary Vikram Misri’s visit. Foreign Secretary Amrit Bahadur Rai is expected to hand India Nepal’s priority-project list. The final selection, financing terms, and timing remain subject to negotiations between the two governments.

Nepal previously received two Indian lines of credit, announced in 2014 and after the 2015 earthquake donor conference. However, the country did not fully use either facility. The main problem identified in the article was not a lack of need, but conditions attached to the financing.

Former Nepali ambassador to India Shankar Sharma said Indian local-content requirements hampered implementation. These requirements included using Indian raw materials, technicians, engineers, and machinery. Such rules can restrict project choices and make it harder for Nepal to use the available credit efficiently.

The earlier experience matters as Nepal seeks more than $1 billion in new credit. Sharma said Nepal had a standing request for a $750 million line of credit, but now needs more after the Bhotekoshi flood. He also said the full negotiations would not conclude during Misri’s visit, suggesting that financing terms will remain important in later discussions.

If India approves the requested assistance, Nepal would gain additional resources for development and reconstruction. The proposed package directly targets domestic power transmission, a major highway, and infrastructure damaged by flooding. These projects are linked to both longer-term infrastructure needs and urgent recovery.

The mechanism would be a combination of repayable credit and grants. More than $1 billion in credit would support transmission lines and other projects. Two proposed $500 million grants would fund Siddhartha Highway improvements and rehabilitation after the August 26 Bhotekoshi flood. This would supplement Nepal’s own resources and other donor support.

Approval would not automatically guarantee full implementation. Nepal previously struggled to use Indian credit because of local-content requirements involving Indian materials, workers, and machinery. The final package, project list, and conditions therefore matter greatly. Officials expect negotiations to continue, with a possible announcement during Prime Minister Shah’s India visit.

Countries seek mixed financing because infrastructure projects require large sums, while no single funding source may be sufficient. Grants reduce repayment pressure, concessional loans provide additional capital, and support from several partners can widen the pool of available resources.

Nepal’s proposal shows this balance clearly. It wants more than $1 billion in Indian lines of credit for transmission lines and other infrastructure, plus $1 billion in grants for the Siddhartha Highway and flood-damaged infrastructure. Former finance minister Rameshwor Khanal said Nepal cannot rely on grants alone for reconstruction.

The article also notes that global grant assistance is declining. Nepal is therefore seeking additional resources from bilateral and multilateral donors, with India among its primary partners. A mixed approach can help match grants to urgent recovery needs and loans to larger development projects, but Nepal must also consider financing conditions because earlier Indian credit was not fully used.