Asian Development Bank Approves $85M Loan to Modernize Irrigation in Nepal

ADB Senior Safeguards Officer for Environment, Deepak Bahadur Singh, stated, “This project will help Nepal modernize its agriculture sector, improve farmers’ incomes, and enhance food security.”

The Asian Development Bank (ADB) has approved an $85 million loan aimed at modernizing irrigation networks and enhancing agricultural production in Nepal, where agriculture accounts for 26% of the country’s gross domestic product (GDP). Despite this significant contribution, the sector has faced stagnation, with growth rates hovering around 2.7% annually. This stagnation is largely due to unreliable irrigation and the increasing frequency of climate-related hazards such as floods, droughts, and heatwaves, which have heightened food insecurity and diminished resilience.

The Irrigation Modernization Enhancement Project is designed to create a more efficient and climate-resilient agricultural and irrigation system that will benefit approximately 56,000 farm households across five provinces in Nepal.

ADB Senior Safeguards Officer for Environment, Deepak Bahadur Singh, stated, “This project will help Nepal modernize its agriculture sector, improve farmers’ incomes, and enhance food security.” The initiative will include infrastructure development, provision of equipment and machinery, the introduction of climate-smart agricultural practices, and capacity-building efforts for farmers and institutions to bolster the sector’s contribution to Nepal’s overall development.

Key components of the project involve upgrading over 31,000 hectares of agricultural command areas, which include more than 100 farmer-managed irrigation systems under the Rajapur Irrigation Project. Planned improvements encompass constructing gated regulators, river embankments for flood protection, canal under-sluices, and implementing hill-lift irrigation along with micro-irrigation systems.

Additionally, ADB will focus on building the capacity of farmers and government agencies in integrated crop water management by aligning irrigation management, infrastructure management, and agricultural development. This holistic approach aims to enhance agribusiness, establish robust value chains, and strengthen links to private agro-enterprises.

To further support farmers, the project will facilitate water user associations (WUAs) in accessing financing for modern farming machinery and equipment while providing training in advanced agricultural technologies. It will also establish digital advisory services to deliver vital information to farmers, WUAs, and water user cooperatives regarding weather patterns, seasonal crop planning, and marketing strategies.

The total cost of the project is estimated at $133.64 million, which includes a contribution of $16.14 million from the Nepalese government and $2.5 million from farmer-beneficiaries. The government is currently finalizing arrangements to secure a loan from a development partner to cover the remaining $30 million funding gap through co-financing.

ADB, founded in 1966 and comprising 69 member countries (49 from the Asia-Pacific region), remains committed to fostering a prosperous, inclusive, resilient, and sustainable Asia and Pacific, while continuing its efforts to eradicate extreme poverty.