The World Bank Group (WBG) and Nepal government signed an agreement has to utilize credit worth $300 million, which is equivalent to Rs 31 billion for the post-earthquake reconstruction and development works.

The amount of money is part of World Bank's pledge to provide $500 million support for post-earthquake reconstruction and development, which was announced during the International Conference on Nepal’s Reconstruction on June 25.

The loan assistance will be utilized for Financial Sector Reform Action support and for the implementation of the Earthquake Housing Reconstruction Project.

Both financing agreements to these effects were signed between the government and the World Bank Group at the Ministry of Finance, Kathmandu, today. The main objective of the $100 million loan assistance is to avail budgetary support to the government to help carry out the second phase of financial sector reform programme under the second phase of financial sector budgetary support, according to Johannes Zutt, WBG country director to Nepal.

The $100 million assistance has been extended to the country as it has successfully implemented a majority of the components that were mentioned in the Financial Sector Restructuring Project and the government is going to amend the Bank and Financial Institutions Act to maintain financial stability and further enhance regulatory and supervisory capacity of the central bank.

“The WBG has extended this assistance to support Nepal government’s commitment to continue with the second phase of financial sector reform and development during 2015-16,” said Zutt.

Similarly, the Earthquake Housing Reconstruction Project comprises three components. First component is the housing reconstruction programme through grant to 55,000 households in targeted areas to reconstruct the multi-hazard resilient core housing units. Second component supports enabling the establishment of a system that provides better disaster risk reduction, preparedness and disaster response. The third component is related to capacity development and effective implementation of the project.

This project will be implemented by the Ministry of Federal Affairs and Local Development and Ministry of Urban Development.

The amount that WBG agreed to provide will be allocated in a single withdrawal tranche, meaning it can be withdrawn through a single cheque. The loan amount doesn’t charge any interest from the government and will have a payback period of 40 years.

Both agreements were signed by Suman Prasad Sharma, finance secretary and by WBG Country Director Zutt.