Nepal’s PM and Citizens Demand World Bank Grants for Flood Recovery
Devastating floods and mudslides struck the Bhotekoshi and Trishuli river basins in Nepal on August 26, 2026, triggering an intense international dispute over whether post-disaster recovery funds should be issued as grants or repayable loans. Following the disaster, the World Bank announced up to US$170 million in emergency financing on September 23, 2026, to restore critical infrastructure and services.
Prime Minister Balendra Shah and Public Demands for Grants
The announcement immediately drew public pushback within Nepal. On September 24, 2026, Nepal’s Prime Minister, Balendra Shah, called for international support to take the form of grants rather than loans. Prime Minister Shah argued that climate-vulnerable nations should not take on additional debt to recover from environmental crises they did little to cause.
An open letter dated August 31, 2026, issued by the people of Nepal and addressed to the World Bank Group’s president and executive directors, formally rejected the proposed financing terms. The letter targeted the World Bank’s Catastrophe Deferred Drawdown Option (Cat DDO). While the Cat DDO provides rapid liquidity post-disaster, it functions as concessional debt requiring repayment with interest.
This is not an ordinary natural disaster, this clearly is the climate crisis burden that Nepal has been confronting frequently every year, wiping our communities, lives and livelihoods.
The open letter criticized the inclusion of approximately NPR 25 billion in proposed disaster-financing mechanisms, asserting that adding sovereign debt to a developing nation facing severe climate loss and damage amounts to an injustice. The signatories demanded the complete conversion of the proposed flood response loans into non-repayable grants, full transparency on the financing terms, and direct support for accessing loss and damage funds without expanding the national debt burden.
Nepal Seeks Debt-Free Grants for River Basin Recovery
As recovery efforts continue in the affected river basins, the financial structure of the international assistance remains a central point of contention. While the World Bank has established liquidity availability up to US$170 million for immediate response and infrastructure restoration, the demand from local groups and government leadership for debt-free grant financing leaves the exact terms of disbursement unsettled.
Official adjustments to the Cat DDO mechanism or conversion of the NPR 25 billion package into grants have not been confirmed by the World Bank. The government of Nepal faces mounting pressure from its citizenry to reject credit-based disaster packages in favor of solidarity and direct grant aid.