Foreign Aid Contribution for the Development of Nepal

Abstract

Purpose: Nepal is small and beautiful country with a great deficiency in infrastructure development.   Foreign aid is believed as key component for development in Nepal. The Paper aims to assess foreign aid contribution for developing Nepal.

Design/Methodology/Approach: The study is based on secondary data from 2001/02 to 2014/15 with special reference to Swiss aid. The correlation and regression with normality test have been applied to conform the contributory association among GDP, Swiss Aid and total Aid.

Findings/Result: The real GDP and Aid are highly associated. The regression line is well fit and explained that 85 percent real GDP depends on Swiss aid and the remaining 14 percent other variables. The coefficient of LNTAD is 0.35 and it shows that one percent increase in the total aid increases real GDP by 0.35 percent. The coefficient of LNTAD is positive and significant, meaning that the increase in the total aid increases economic growth in Nepal. By using Brush- Godfery LM test, the P value is more than 5 five percent, which is 32 percent indicates that there is no autocorrelation among the error terms. 

Originality/Value: It is an empirical research to signify the contribution of aid for development of Nepal using inferential model.

Paper Type: Analytical Policy Research