ADB support to strengthen fiscal management, service delivery in Nepal

MANILA: The Asian Development Bank (ADB) today approved a $100 million policy-based concessional loan to strengthen the country’s fiscal management and to promote decentralization.

The Strengthening Public Financial Management and Devolved Service Delivery Program supports structural fiscal transformation until 2025 through significant reforms related to expenditure and debt management at federal level, and resource planning and management at subnational level. A post-program partnership framework will guide the sustainability of the reforms beyond 2025.

“This ADB program will introduce reforms to enhance the quantum and quality of capital spending, reform public enterprises to mitigate fiscal risks, digitize to enhance fiscal transparency and efficiency, leverage additional resources from development financing institutions, and implement a gender- and climate-responsive medium-term expenditure framework at the subnational level,” said ADB Public Management Economist Chandan Sapkota.

ADB has been supporting Nepal to improve expenditure and debt management. Policy reform actions that support this include institutionalization of a fiscal policy statement, approval of legal framework and strategy for debt management, public enterprises reform, electronic government procurement including contract management, and digitization of expenditure recording and reporting at the three tiers of government.

The program includes approval of a fiscal risk and strategy report and its operationalization, transparency in debt management and implementation of an annual borrowing plan, improvement in governance and management of public enterprises, and implementation of a medium-term public financial management reform strategy.

“The ADB program will support institutionalization and operationalization of devolved public services to strengthen fiscal federalism as outlined in the 2015 constitution,” said ADB Public Management Specialist Rachana Shrestha. “To help strengthen local governance and the delivery of devolved services, the program will strengthen policy reforms aimed at improving resource generation capabilities of subnational governments.”

The program will also help municipalities revise and update the property tax rate to boost revenue, implement a gender and climate responsive medium-term expenditure framework, and improve public investment management. It will support the establishment of an IT-based model taxpayer registration system and public asset management system.

ADB will provide an additional $1.5 million technical assistance grant from its Technical Assistance Special Fund to support the implementation of policy actions and institutional strengthening. It will also support the implementation of the post-program partnership framework.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.