Donors warn Nepal political deadlock may limit aid

KATHMANDU Wed Nov 24, 2010 3:20am EST

KATHMANDU (Reuters) - Foreign donors including the United States have urged Nepal's leaders to end a political deadlock that they say has stifled development projects and could limit future aid to South Asia's poorest country.

Nepal has been in political turmoil since June when Prime Minister Madhav Kumar Nepal resigned under pressure from the Maoist opposition who dominate parliament but have failed in 16 attempts to elect a new leader.

This is the first time donors have voiced concerns over the political stalemate, which has threatened the peace that ended a decade-long civil war four years ago and delayed the drafting of the nation's first republican constitution.

The caretaker government was forced to use emergency presidential powers this weekend to unveil a four-month delayed annual budget after the Maoists refused to lend their support.

While development continues in certain sectors, the political impasse has stalled or slowed many development projects and may negatively impact future donor assistance, a dozen foreign donors, including the World Bank and the European Union, said in a statement late on Tuesday.

"Nepal's unstable political situation has made it increasingly difficult for many donors to justify why Nepal should receive support in a world where there are many competing demands for limited development resources."

More than two-thirds of Nepal's economic development relies upon international aid.

There was no immediate comment from government officials.

Lok Raj Baral, chief of the Nepal Center for Strategic Studies, said the donors' comments did not mean an outright termination of aid but showed their rising frustration over the political standoff.

"What is the purpose of continuing giving aid to the country where political parties cannot form a government and where nothing works?" Baral told Reuters.

(Editing by Henry Foy and Sugita Katyal)

FILED UNDER: