Nepal recently signed a soft loan agreement worth Rs. 14.168 billion (15.137 billion Yen) with the Japan International Cooperation Agency (JICA) to receive official development assistance for the Tanahun Hydropower Project. The loan agreement was signed between the Joint Secretary at the Ministry of Finance, Nepal, Madhu Kumar Marasini and Director General of South Asia Department of JICA, Masataka Nakahara. This ends a decade long hiatus from Japan to provide Nepal with financial assistance for the hydropower project. According to the plan, Japan will contribute to Nepal’s economic growth and so- cial development through three types of assistance: Japanese ODA loans, technical cooperation, and grant aid.
Japan provided Nepal with development loans until 2001 but halted further assistance citing political instability. The 140 MW reservoir project, located in Tanahun district in western Nepal, will help the country in developing its agricultural sector that desperately needs an effective reservoir system. The loan provided by Japan has a maturity period of 40 years with the first ten years as grace period. Nepal is not required to pay any interest during the grace period. However, the loan has an interest rate of 0.01 percent and consulting fees amounting to the same.
Where the JICA is the primary financier to the project, Nepal will receive co-financing from the Asian Development Bank (ADB), the European Investment Bank (EIB), and the Abu Dhabi Fund.