MoF drafts third national strategy for PFM reform, Focuses on fiscal discipline and efficiency

KATHMANDU: The Government of Nepal has drafted the Third National Strategy for Public Financial Management (PFM) Reform, aimed at strengthening fiscal discipline, transparency, and effective public service delivery across all tiers of government.

According to the Ministry of Finance, the five-year strategy—spanning from FY 2082 to 2087 BS (2025–2030 AD)—sets a comprehensive roadmap to enhance the efficiency of resource allocation and ensure fiscal sustainability within Nepal’s federal governance framework.

The Ministry stated that the implementation of the new strategy would contribute significantly to sustaining Nepal’s federal structure by improving coordination between the federal, provincial, and local governments.

The new PFM reform strategy follows earlier versions introduced after the implementation of federalism, incorporating lessons from prior fiscal management initiatives. It aims to make Nepal’s budgeting, expenditure, and auditing systems more results-oriented, accountable, and technology-driven.

According to the Ministry, the key objectives of the strategy include ensuring a credible, evidence-based, and sustainable budget process, strengthening performance-based budgeting, modernizing revenue collection and reporting systems, improving procurement and asset management, and reinforcing internal control and auditing mechanisms.

The document emphasizes the importance of sound fiscal discipline, highlighting that the effective mobilization of public finance remains essential for achieving economic stability, promoting investment, and maintaining citizens’ trust in government institutions.

The Finance Ministry said the reform will guide improvements in critical areas such as fiscal policy formulation, revenue mobilization, expenditure management, internal control, accounting, and auditing. The strategy also seeks to foster greater transparency and good governance through modernized digital systems and policy coherence.

Furthermore, the reform aims to institutionalize a robust, coordinated, and transparent financial management system that strengthens collaboration among all three levels of government. This includes developing performance-based budget systems and streamlining administrative mechanisms to ensure timely project execution and value for public money.

Officials at the Ministry said the third PFM strategy builds on past achievements but incorporates stronger accountability frameworks, particularly in budget credibility and expenditure efficiency. The move aligns with Nepal’s broader public sector modernization agenda supported by development partners such as the World Bank, IMF, and ADB, which have consistently emphasized fiscal prudence as a foundation for macroeconomic stability.

With Nepal facing increased fiscal pressures amid subdued revenue growth and rising expenditure obligations, the Ministry has prioritized the implementation of effective internal controls and a results-oriented budgeting process. The reform, once approved by the Cabinet, will serve as a key policy document for the next five years of fiscal governance.