Raju Pandit Chhetri
July, 2022
Nepal requires scaled-up finance to achieve the priority adaptation actions set out in its 2021 National Adaptation Plan (NAP) and 2020 Nationally Determined Contribution. Nepal already mobilises substantial domestic resources from the government’s fiscal budget to address increasing climate-induced disasters such as landslides, floods, and droughts. Despite the large volumes of national finance for adaptation, Nepal needs to attract increased volumes of international finance that supports nationally defined adaptation priorities and addresses development and climate adaptation priorities in an integrated manner.
The Government of Nepal plans to develop a financing strategy for its NAP and NDC, and will need to engage development partners as part of participatory process to prepare this plan. The World Bank and Asian Development Bank (ADB) are long-standing development partners in Nepal that deliver substantial amounts of financing for adaptation. These MDBs can play a critical role to address the adaptation financing gap in Nepal, and moving forward, the government can encourage engagement with MDBs in a manner that contributes to financing adaptation in a positive manner. This can include:
Engaging MDBs early in processes to develop financing strategies for adaptation to raise their awareness of priority actions, and to identify where MDB support can be used in a strategic manner to generate additional finance for adaptation.
Providing consistent messaging on adaptation priorities to MDBs by ensuring that the Ministry of Finance that leads negotiations with MDBs and the Ministry of Forests and Environment that is the climate change focal ministry share a common understanding of the strategic adaptation priorities for grant funds and concessional loans provided through MDBs.
Using strategic documents, such as the NDC, NAP, and climate vulnerability and risk assessments, to identify adaptation priorities, guide decisions, and inform the government-MDB dialogue. These are valuable sources of information that can inform MDB technical and financial analysis.
Encouraging MDBs to consider national adaptation priorities as set out in the NAP and NDC in their country engagement strategies and programmes, and ensuring that all relevant MDB investments help build the adaptive capacity and resilience of the country.
Using MDBs’ international expertise in mobilizing climate finance to scale up resources for the Nepal government to implement its adaptation priorities.
Using the experience and expertise of MDBs to encourage private sector involvement in climate change adaptation, which is almost absent in Nepal.
Using MDB analysis to inform adaptation plans, financing strategies, and cost estimates of adaptation actions. MDBs often have invested significant resources in analysis and project preparation that includes climate risk and vulnerability analysis, costing assessments and other analysis that can inform the policies and plans of government.
Encouraging MDBs and other development partners to simplify their funding processes and conditions so that national institutions can easily comprehend these processes and better engage with MDBs through the MoF.
Encouraging MDBs to provide and mobilize grant-based finance for non-revenue generating adaptation investments.
Using an approach to financing adaptation action that is based on a system of integrating adaptation actions in the national development priorities. MDBs are critical partners in financing climate-resilient infrastructure.
Working with MDBs to prepare and present bankable adaptation projects (being projects that comply with all the information required by a funding entity, and offer an expected return as repayment) that are informed by measurable and quantitative data of the implementation costs and benefits.
Nepal can encourage a more strategic approach to MDB financing that can help to scale up support for nationally defined adaptation priorities through increased volumes of finance, strategic use of grant funds to leverage other development partner and private sector investment, and ensuring that MDB programs address development and climate adaptation priorities in an integrated manner.
