The FY03-08 evaluation period was one oftumultuous political turmoil, conflict, and dramatic changein Nepal; today, prospects for sustainable peace arebrighter, though still fragile. In such difficult andunpredictable conditions, formulating and implementing aneffective development assistance strategy and programs weregreat challenges for development partners, including theBank. To its credit, the Bank managed to remainconstructively engaged in Nepal despite a challengingpolitical and security context and has achieved somesignificant results on the ground. Nevertheless, theBank's strategy was poorly adapted to thecountry's conflict situation and political instability,and until recently (FY08) underwent little adjustment inresponse to the rapidly-evolving conditions on the ground.Looking forward, Independent Evaluation Group (IEG)recommends that International Development Association (IDA)introduce greater realism into its strategy and programdesign and keep these flexible against a backdrop of a clearlong-term vision, applying frequent course corrections inresponse to changing circumstances and consulting widelywith national stakeholders and development partners. Otherthan through its existing portfolio of two hydropowerprojects, International Finance Corporation (IFC) did notmake a significant contribution to Nepal's developmentover most of the review period. IFC's gradualre-engagement beginning in 2006 was successful, resulting intwo Global Trade Finance Program (GTFP) investments, aninvestment in a domestic airline in 2008, a pipeline ofinvestment projects in the financial sector, and aconstructive dialogue with the government on the business climate.
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