Finance minister to lead alternative development finance fund as house panel widens scope

KATHMANDU: The Parliamentary Finance Committee has finalized its line-by-line discussion on the proposed Bill for Alternative Development Finance (ADF) Operations, recommending a key structural change: placing a five-member Director Committee under the leadership of the Finance Minister — instead of the Finance Secretary — to oversee the fund.

In its meeting held Monday in presence of Finance Minister Bishnu Prasad Paudel, the committee agreed to a new governance structure for the ADF Fund in order to ensure higher-level political accountability and inter-agency coordination.

Under the new proposal, the Director Committee will comprise:

The Finance Minister as coordinator

Vice Chairperson of the National Planning Commission

Governor of the Nepal Rastra Bank

The Chief Secretary of the government

The CEO of the Investment Board Nepal

This replaces the government’s original draft, which had proposed only a board of directors chaired by the Finance Secretary.

Unclear Mandate of Director Committee Raises Governance Questions

While the structure of the Director Committee has been agreed upon, its functions, duties, and decision-making powers are not yet clearly defined. The Draft Bill had originally proposed that policy-level decisions would be taken by the Cabinet, while operational decisions would be handled by the Board of Directors (chaired by the Finance Secretary).

Now that the Finance Committee has added a superior Director Committee above the board, the division of roles between the Cabinet, Director Committee, and Board of Directors remains unclear, prompting calls for further clarification. The Committee Chair, Santosh Chalise, said the Finance Ministry has been instructed to specify the scope of authority of the Director Committee before the Bill is tabled for full House approval.

Expanded Investment Sectors: Agriculture, Forestry & Mining Added

In a major amendment, the Finance Committee has expanded the sectors eligible for funding under the Alternative Development Finance mechanism. The original draft only included large infrastructure sectors such as:

Hydropower production, transmission & distribution

Roads, railways, airports, tunnels

Industrial infrastructure (SEZs, IT parks, dry ports)

Urban infrastructure, cable cars, ropeways, podways, etc.

The Committee has now added agriculture, forest products, and mineral extraction industries to the list — allowing the ADF Fund to invest in these sectors as well.

Fund Size & Shareholders: Provinces and Local Levels to Participate

The Bill proposes an authorized capital of Rs 100 billion and paid-up capital of Rs 25 billion, with the Federal Government holding a 51% share. The Finance Committee has further recommended that provincial and local governments also be allowed to purchase shares in the Fund — widening ownership and potentially unlocking additional capital.

Originally, the Bill only allowed the Federal Government to hold majority equity. Committee members argued that involving provinces and local governments as shareholders would ensure broader participation and promote federal financial mobilization.

Background and Purpose of the Fund

The Alternative Development Finance Fund is being proposed to create a long-term financing vehicle outside traditional budgetary channels, targeting large-scale infrastructure and development projects through blended finance, public-private partnerships and mobilization of institutional investors.

The government hopes this fund can meet financing gaps in strategic projects amid limited fiscal space and rising debt servicing pressure on the national budget.

However, parliamentary members have expressed concern that without clear governance mechanisms, the Fund could become an opaque body dominated by the executive, lacking transparency in project selection and resource mobilization.