Press Release

Nepal to boost small-scale irrigation systems with US$7 million OPEC Fund loan

140/2005 December 21, Vienna, Austria
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The OPEC Fund for International Development today signed a US$7 million loan agreement with the Kingdom of Nepal to help raise living standards among rural smallholders in the Central and Eastern development regions by boosting the productivity of farmer-managed irrigation systems (FMIS).

The project aims to intensify agricultural production on 25,000 hectares of existing irrigated land and bring an additional 8,500 ha under irrigation by improving the water distribution system.

Nepal has a long history of irrigated agriculture. Rainfall is plentiful but erratic, so irrigation is vital to guarantee year-round productivity. Around three-quarters of the total irrigated area is farmed by small- to medium-sized FMIS, but close to half of these systems are in urgent need of rehabilitation. Crude diversion structures, made of earth, logs or brushwood, are often washed away by floods, while rudimentary distribution systems lead to irregularity of supply and high water wastage. As a result, output is low, rarely rising above subsistence level in many areas.

Project activities will focus on building the capacities of Water User Associations to identify, plan and implement a range of sub-projects designed to improve irrigation infrastructure, such as diversion structures, cross-drainage works, canals and flood protection facilities. Diversification will be encouraged through the provision of agricultural extension services to help promote the adoption of high-yielding and improved varieties of crops. To ensure the sustainability of the project and improve governance of the sector, a further component aims to strengthen national-level institutions responsible for agriculture and water resources.

At full development, the project will improve the livelihoods of over 270,000 poor men and women through increased incomes, enhanced food security and better employment opportunities.

To date, the Fund has extended 13 loans to Nepal, including one for balance of payment support, one to finance a commodity imports program, and 11 for projects in the agriculture, education, energy, telecommunications, transportation, and water supply and sewerage sectors. Nepal has also been the recipient of several grants from the Fund.

Today’s agreement was signed in Vienna by Mr. Bhanu Prasad Acharya, Secretary of the Ministry of Finance of the Kingdom of Nepal, and by HE Mr. Jamal Nasser Lootah, Chairman of the Governing Board of the OPEC Fund.