Major Donor-Funded Projects in Nepal: Who Funded What

Most of Nepal's largest infrastructure — drinking water systems, highways, hydropower plants and airports — has been built with foreign development finance. Yet the record of who funded what is scattered: the Asian Development Bank (ADB) publishes its own project pages, the Japan International Cooperation Agency (JICA) its own press releases, and Nepal's Ministry of Finance (MoF) tracks commitments in its Aid Management Information System (AMIS). A person searching for 'melamchi water supply project' or 'pokhara airport china loan' typically finds news fragments, not a neutral factual record. This directory fills that gap for five flagship projects, recording the funder, financing type, cost, timeline and status of each from primary donor and government records.

The financing type matters as much as the headline amount. Grant aid, such as Japan's assistance for the Sindhuli Road, never has to be repaid. Concessional or 'soft' loans, such as those behind Melamchi, Tanahu and Pokhara airport, carry low interest and long maturities but still add to Nepal's public debt and must be serviced whether or not the asset earns revenue. Private project finance, as used for Upper Trishuli-1, is repaid from the project's own electricity sales rather than the government budget.

The list below summarises the five flagship donor-funded projects covered on this page — sector, lead funder, financing type, approximate cost and status as of mid-2026. Detailed per-project sections follow, with key dates in both Bikram Sambat (BS) and Gregorian (AD) calendars.

The Melamchi Water Supply Project (MWSP) diverts water from the Melamchi River in Sindhupalchok district through a roughly 26.3 km tunnel to a treatment plant at Sundarijal, on the northeastern rim of the Kathmandu Valley. Its first phase is designed to deliver 170 million litres per day (MLD), with later phases intended to add the Yangri and Larke rivers and raise capacity toward 510 MLD. The project was formally launched in November 1998 (2055 BS), and the ADB — its lead financier — approved Loan 1820-NEP on 21 December 2000. The original plan cost about US$464 million (2000 prices), shared among the ADB (US$120 million), the World Bank, Japan, Norway, Sweden, the OPEC Fund and the Nordic Development Fund, alongside the Government of Nepal.

The financing coalition did not hold. The World Bank withdrew in 2002 and Sweden's Sida later exited amid governance concerns, after which the project was restructured to about US$317 million, with the ADB's share raised to roughly US$137 million and JICA financing the Sundarijal treatment plant. Contractors also churned: the Italian firm CMC di Ravenna abandoned the near-complete tunnel in December 2018, and China's Sinohydro was engaged to finish the remaining works. Water finally flowed through the tunnel to Kathmandu in March 2021 (Falgun–Chaitra 2077 BS), and the ADB loans closed on 30 June 2021.

Weeks later, on 15 June 2021 (Asar 2078 BS), a catastrophic debris flood on the Melamchi River buried the headworks under rock and sediment. Since then water has been diverted only seasonally — normally from around October to June — through a temporary arrangement, with occasional interruptions from local disputes, as in November 2025. A permanent fix is being prepared under the ADB-supported Kathmandu Valley Water Supply Improvement Project Phase 2, reportedly budgeting about US$240 million, including a US$170 million ADB loan, for new headworks 500–600 metres upstream of the destroyed site.

The Sindhuli Road — officially the BP Koirala Highway, linking Banepa near the Kathmandu Valley to Bardibas in the eastern Tarai via Sindhuli — is the clearest example of pure grant financing among Nepal's megaprojects. Japan built the 160 km mountain highway through JICA grant aid totalling about ¥25.8 billion, which JICA describes as its largest grant-financed road project anywhere in the world. Because it was a grant, Nepal incurred no debt: construction ran in four sections from 1996 (2053 BS) to completion in March 2015 (Chaitra 2071 BS), and Japan formally handed the road over to the Government of Nepal later that year.

The highway cut travel time between Kathmandu and Bardibas from more than nine hours via older routes to about five hours, opened Sindhuli, Ramechhap and Kavrepalanchok districts to markets, and became a case study in disaster-resilient hill-road engineering, with Japanese and Nepali engineers jointly developing slope-protection techniques now used elsewhere in Nepal.

Japan's engagement has continued after handover. Torrential rain from 26 to 28 September 2024 caused floods and landslides that seriously damaged sections of the highway, and on 30 October 2025 Nepal and JICA signed a fresh grant agreement worth up to ¥2.8 billion (about NPR 2.6 billion) for rehabilitation, with reconstruction beginning in 2026. Nepali officials have put the full cost of restoring all damaged sections at roughly Rs 9.5–9.7 billion.

The Tanahu Hydropower Project is a 140 megawatt (MW) storage-type plant on the Seti River near Damauli in Tanahun district, about 150 km west of Kathmandu, often described as Nepal's third seasonal-storage plant after Kulekhani I and II. It is being developed by Tanahu Hydropower Limited, a subsidiary of the Nepal Electricity Authority (NEA), and centres on a roughly 140-metre-high concrete gravity dam. Unlike run-of-river plants, its reservoir lets it generate firm power in the dry season, when Nepal's electricity imports from India normally peak.

The project is a classic multilateral co-financing package. In 2013 (2069–2070 BS) the government signed a US$150 million loan with the ADB, a loan of about US$184 million with JICA, and an EIB loan initially of US$70 million and later raised to about US$85 million, against a total estimated cost of about US$505 million, with the government and NEA covering the balance. The ADB subsequently approved additional financing to cover cost and time overruns.

The Seti River was diverted through tunnels on 6 November 2023 to allow dam construction, and by May 2026 overall physical progress was reported at about 75 percent — meaning the May 2026 commissioning target has been missed and generation is now expected later. When complete, the plant is designed to produce roughly 587 gigawatt-hours a year in its early decades, with the reservoir also expected to support fisheries and tourism around Damauli.

Upper Trishuli-1 (UT-1) is a 216 MW run-of-river hydropower project on the Trishuli River in Rasuwa district, about 70 km north of Kathmandu, and Nepal's largest foreign-direct-investment hydropower venture to date. It is being built by the Nepal Water and Energy Development Company (NWEDC), a project company whose main shareholders are the Korean utilities Korea South-East Power (KOEN) and Korea Overseas Infrastructure and Urban Development Corporation (KIND), together with the International Finance Corporation (IFC) and Nepali partners. Doosan Enerbility of South Korea is the main construction contractor.

The financing model differs fundamentally from Melamchi or Tanahu: the debt sits with the private project company, not the Nepal government. In November 2019 an IFC-led consortium signed a US$453.2 million debt package — lenders included the ADB, AIIB, the Export-Import Bank of Korea, the Korea Development Bank, CDC Group (now British International Investment), FMO of the Netherlands, Proparco of France and the OPEC Fund — against a total project cost of about US$647 million. The NEA buys the output under a 30-year power purchase agreement signed in January 2018, denominated partly in US dollars for roughly the first decade after commissioning, a first for Nepal.

Main construction began around December 2021–January 2022, after long delays caused by the 2015 Gorkha earthquake — whose epicentral zone lies close to the site — and the COVID-19 pandemic. By 2026 the project had installed and tested its weir gates, and the developer was targeting full commissioning around mid-2027, with expected annual generation of about 1,456 GWh.

Pokhara International Airport is Nepal's third international airport and the country's most controversial donor-funded project. It was built by the state-owned contractor China CAMC Engineering under a turnkey contract originally priced near US$305 million, which parliamentary scrutiny forced down by about 30 percent to US$215.96 million. To pay for it, Nepal signed a loan of about US$215.96 million with the Export-Import Bank of China in 2016: roughly 25 percent interest-free and 75 percent at about 2 percent annual interest, repayable over 20 years with a seven-year grace period. Construction began in April 2016 (Baisakh 2073 BS), and Prime Minister Pushpa Kamal Dahal inaugurated the airport on 1 January 2023 (17 Poush 2079 BS).

The airport has a single 2,500-metre runway suited to narrow-body jets, but as of 2026 it handles mainly domestic flights and occasional international charters, with no regular scheduled international services — leaving it unable to earn the revenue needed to service the Chinese loan. Nepal has formally asked Beijing, including through a request reported in August 2024, to convert the loan into a grant; no conversion had been announced as of early 2026. China calls the airport a flagship of the Belt and Road Initiative (BRI), although the financing agreement predates Nepal's 2017 accession to the BRI.

Accountability proceedings have followed. On 7 December 2025 the Commission for the Investigation of Abuse of Authority (CIAA) filed a corruption case against 55 people — including five former ministers — and China CAMC Engineering, alleging that cost inflation and collusion caused losses of about Rs 8.36 billion (roughly US$74 million). Further cases followed in March 2026 and May 2026. The airport has become the standard cautionary example in Nepal's debate over loan-financed versus grant-financed infrastructure.

Every claim about who funded a Nepali project can be checked against primary records, the best defence against politicised claims on social media. Multilateral banks publish full project files — approval dates, loan amounts, progress reports and completion evaluations — on their websites, while Nepal's Ministry of Finance records donor commitments and disbursements in its Aid Management Information System (AMIS) and annual Development Cooperation Report. Implementing bodies such as the Melamchi Water Supply Development Board and Tanahu Hydropower Limited also publish status updates.

The five projects also carry a broader lesson about financing structure. The grant-funded Sindhuli Road left no debt and is judged a clear success; the loan-funded Melamchi and Tanahu projects are delivering essential public goods but with long delays and debt-service obligations; the privately financed Upper Trishuli-1 shifts repayment risk to investors but locks in dollar-denominated power payments; and Pokhara airport shows what happens when a loan funds an asset that cannot earn commercial revenue. Understanding these distinctions — not just headline dollar figures — is essential to judging any new project Nepal signs.