Finance ministry forms task force to draft new laws for strengthening budget discipline

KATHMANDU: In a significant move to reinforce budget discipline and fiscal accountability across all tiers of government, Nepal’s Ministry of Finance has announced the formation of a specialized task force to draft a new law aimed at enhancing public expenditure efficiency and enforcing budgetary discipline.

According to officials at the ministry, the task force will be led by Mahesh Baral, Head of the Financial Federalism Coordination Division at the Ministry of Finance. The committee includes key representatives from the ministry’s Budget Division and Legal Affairs Division, with former Joint Secretary Nirmalhari Adhikari joining as an expert member. An Undersecretary from the Financial Federalism Division will serve as the member secretary.

This development comes in line with Point No. 359 of the Fiscal Year 2025/26 Budget Statement, which prioritizes improving budget allocation efficiency, increasing the impact of public expenditure, maintaining balance in the Federal Consolidated Fund through cash flow management, ensuring sustainable use of public debt, and implementing the National Financial Management Reform Strategy.

Moreover, Point No. 371 of the same budget statement clearly directs the formulation of legislation to institutionalize budget discipline at all three tiers of government – federal, provincial, and local. It also mandates the development of public expenditure standards that are uniformly applicable across the nation.

The Ministry stated that this task force will initiate the groundwork for a federal law as per Article 59 of Nepal’s Constitution, which outlines the management of budget deficits and fiscal discipline at federal, provincial, and local levels through federal legislation.

The proposed legal framework is expected to address longstanding concerns about weak budget execution, inefficient spending, and lack of transparency in public finance. Experts suggest that such a framework could also support Nepal’s macroeconomic stability, optimize the use of public debt, and improve the country’s creditworthiness and fiscal governance ratings internationally.

This move aligns with Nepal’s broader financial reform commitments made under various international cooperation programs, including engagements with the International Monetary Fund (IMF), Asian Development Bank (ADB), and World Bank. These institutions have long emphasized the importance of public financial management (PFM) reforms and fiscal discipline as prerequisites for sustainable development, foreign direct investment (FDI) inflows, and donor confidence.

The Ministry of Finance clarified that the task force will work on:

Drafting a new federal law governing public budget discipline,

Proposing binding guidelines for public expenditure applicable to all levels of government,

Recommending institutional mechanisms for implementation and oversight,

Ensuring constitutional compliance and long-term fiscal sustainability.

The initiative is also expected to support the implementation of Performance-Based Budgeting (PBB) practices and Digital Public Finance Systems, both of which are essential for improving transparency, reducing waste, and delivering better value for public money.

As Nepal grapples with high public debt, fluctuating revenue collection, and increasing demands for public services, this task force is seen as a vital step towards ensuring that Nepal’s public finance system is resilient, efficient, and responsive to national development goals.