IMAGE VIA SHUTTERSTOCK
DRIVE FOR HOURS west from Kathmandu, beyond the reach of reliable electricity and paved roads, and you will find Bayalpata Hospital in Achham district. It is a clean, functional complex offering high-quality surgery and diagnostic services. It is also a government hospital, though it scarcely looks like one. For nearly two decades it was run by Nyaya Health Nepal, an American-affiliated charity. Donors paid the bills; the state supplied the building and a small subsidy.
Donor support, however, is drying up. Last year Sudurpaschim’s provincial government formally assumed control, pledging to operate Bayalpata as a 50-bed public facility. Yet even combined provincial and federal funding falls short of operational needs, leaving the question of whether the state can sustain what charity once did.
The answer across Nepal has been no for decades. A parallel state, financed by foreign donors and operated by non-governmental partners, now provides the services a government should.
That substitution did not happen suddenly. It began with the best of intentions. For much of its modern history Nepal was a cloistered autocracy. When it opened to the world in the 1950s, aid trickled in. After democracy arrived in 1990 it became a flood. The state was weak and the needs were great. Donors found it easier to bypass bureaucratic torpor and channel money straight into charities. The decade-long civil war that started in 1996 accelerated the process, as Maoist insurgents and government forces retreated from vast rural areas. NGOs became the only source of schooling and medicine. The state never reclaimed its role.
Today the scale of that outsourcing is staggering. In the fiscal year 2022-23 direct support to Nepal’s government budget accounted for less than 6% of the $1.4bn in official development assistance the country received. Nearly a quarter of all aid was “off-budget”, spent directly by donors or their chosen implementers without ever touching the national treasury. Even funds earmarked for government ministries often never reach them, instead flowing to consulting firms and international charities hired to do the work. In critical sectors like health as well as education and disaster response, donor-funded NGOs are not merely supporting the state: they have become it.
Consider the mechanics. In education, groups like Open Learning Exchange Nepal design digital curricula and train teachers, filling a void left by the education ministry. In remote villages, water pumps and sanitation blocks are built by charities rather than municipal crews. When an earthquake or a pandemic strikes, the government’s disaster-response agency coordinates relief but depends on the logistic networks of well-funded international groups to deliver it. The state manages the territory, observes one veteran aid worker, but the NGOs manage the people.
That arrangement suits many. Donors get tangible results to report to their headquarters, unencumbered by Nepali procurement rules or political meddling. The Nepali elite benefit, too. Thousands of local NGOs exist mainly to distribute political patronage, distributing jobs and contracts. For the educated professional, a career with an international charity offers salaries and prestige the civil service cannot match. The resulting brain drain further enfeebles the state, which justifies further donor bypass. It is a perfect, self-reinforcing loop.
The 2015 constitution, which established a federal system, was supposed to break that cycle. It devolved power and resources to newly created local governments, bringing authority closer to the people. In truth it has created a new layer of contest. Mayors and council chairs now find themselves battling entrenched NGO networks for influence. Some local governments try to regulate charities out of their districts. Others, spotting a better resource stream, bypass local NGOs to court donors directly. This has produced a fragmented, frequently adversarial environment where planning is impossible and duplication rife.
Accountability dissolves in such a system. An elected mayor must answer to voters. An NGO answers to its donors in London or Washington. Its projects are “islands of excellence”—well-run, externally audited and temporarily effective. They are also ephemeral. When the grant ends, the project tends to vanish. The state, its own capacity long atrophied, cannot step in. This is not development: it is a highly skilled rental operation.
The paradox is that many Nepalis are reasonably satisfied with the services they receive from charities. They see a functional clinic, a new water tap. Yet that very satisfaction corrodes the social contract. Why pay taxes or demand better from elected officials when the real work is done by a foreign charity? A culture of aid dependency becomes entrenched. In rural areas, the Nepali word for development, bikas, has become synonymous with the arrival of a white SUV full of NGO workers.
Nepal is not alone. Haiti became an “NGO republic” after its 2010 earthquake, with so many charities operating that the government became a spectator in its own recovery. South Sudan saw billions in aid channeled through parallel systems that produced no lasting state capacity. These are cautionary tales. A state that does not learn to collect taxes, pay teachers and build roads is not a state at all. It is a geographic convenience for external actors.
The solution is simple in theory, arduous in practice. Donors must treat the strengthening of Nepal’s state institutions as the main goal, not an obstacle. Aid should flow through the national budget, building systems rather than bypassing them. For its part the government must reform a civil service that currently offers little incentive for talent to stay. Local governments should be the chief coordinators of all development work in their jurisdictions, with NGOs as technical partners rather than independent viceroys.
Change will be slow. The entire architecture of international aid—with its short funding cycles, output quotas and distrust of government—is wired for parallelism.
But the alternative is a permanent shadow state, competent yet fundamentally illegitimate. The Bayalpata Hospital saves lives every day. Its existence is proof of humanitarian dedication. Its necessity is proof of failure. A country cannot be run from charity budgets forever. Sooner or later, the ghost ship must either be crewed or it will drift. ■
