Achieving Zero Hunger in Nepal: The Role of Foreign Aid in Agriculture

ABSTRACT Ensuring progress toward the Sustainable Development Goals (SDGs) of “no poverty” and “zero hunger” in the face of changing climatic conditions is crucial for developing countries like Nepal, which, due to limited domestic resources, must rely on foreign aid to strengthen food production. This study examines the critical role of foreign assistance in achieving SDG 2, which focuses on ending hunger and promoting sustainable agriculture. Specifically, we investigate the threshold impact of foreign agricultural aid on agricultural production in Nepal from the first quarter of 1975 to the fourth quarter of 2020. Using threshold analysis, we find a nonlinear relationship between agricultural aid and agricultural production. Below the threshold, agricultural aid boosts production significantly, but above it, the relationship reverses. Additional variables, such as cultivated areas, public agricultural expenditure, and agricultural credit, increase production substantially, although their effects vary between regimes. The farm labor force shows contrasting effects, with a negative impact below the threshold and a positive impact above it. Rainfall negatively affects agricultural production in a low‐aid regime but becomes beneficial in a high‐aid regime. In contrast, temperature has an insignificant positive impact below the aid threshold but significantly hinders production above the specified threshold. Our findings indicate that leveraging substantial foreign aid to increase public investment in agriculture, specifically through infrastructure, research and development, and extension services, will enhance the effectiveness of aid in boosting food production and reducing hunger.