Nepal introduces multi-year funding rules: Focus shifts to priority projects

KATHMANDU: Nepal has rolled out new multi-year funding guidelines, signaling a major shift in how ministries and government agencies plan and execute large-scale projects. The rules, effective from Poush 13, 2082, aim to ensure that only high-priority and nationally significant initiatives receive multi-year financial approvals, while smaller or unprepared projects face stricter scrutiny.

Under the framework, the Ministry of Finance now requires agencies to submit project details through the National Project Bank and obtain approval from the National Planning Commission before seeking multi-year funding. The guidelines also emphasize compliance with environmental assessments for all procurement, except design-and-build contracts.

Finance Ministry Joint Secretary Tanka Prasad Pandey said the rules are intended to curb misuse of multi-year approvals. “Multi-year funding will be granted only for flagship projects with clearly defined costs and allocations. Thresholds have been set to prevent routine projects from being approved for extended funding,” he explained.

The new system sets specific eligibility criteria:

Projects must be listed in the Project Bank and included in the Medium-Term Expenditure Framework.

Total estimated cost must exceed NPR 50 crore for general projects, and NPR 20 crore for government building or service procurement.

At least 25% of the project’s estimated cost must be allocated before approval.

Multi-year approvals are valid for a maximum of three fiscal years, with exceptions for projects of national significance or extraordinary cost.

Certain sectors, such as bridge construction, disaster response, pandemic management, and post-disaster reconstruction, are exempt from cost and allocation limits, reflecting the need for flexibility in emergency or strategic infrastructure projects.

Officials highlight that foreign-aid projects are also treated differently: as long as the government’s share remains within the agreed limit, multi-year approval is not mandatory, though the allocation must still be reflected in the medium-term expenditure plan.

Director General Mitra Baral of the Department of Energy, Water Resources, and Irrigation confirmed that all major national projects—including the Sunkoshi Marine Diversion Multipurpose, Babai and Sikta Irrigation, Mahakali Irrigation, Rani Jamra-Kulriya, and Bheri-Babai Diversion projects—already have multi-year approvals in place. “This year’s focus is on updating and monitoring ongoing flagship projects; no new multi-year approvals are being issued,” he said.

Meanwhile, Ravindra Bohara, Director General of the Department of Urban Development and Building Construction, noted that several projects were submitted to the Finance Ministry ahead of the guidelines. “We have forwarded 573 projects, totaling NPR 17 billion, for approval. Projects that are not prepared or missing Project Bank registration remain on hold,” he added.

Experts suggest the guidelines signal a move toward more strategic and disciplined public investment. By concentrating multi-year funding on high-impact projects, the government hopes to improve accountability, prevent resource misuse, and ensure long-term economic benefits.

This approach also indirectly encourages ministries to plan projects meticulously, prioritize readiness, and align proposals with broader national development goals, creating a more sustainable and transparent project funding environment in Nepal.