World Bank Extends USD 11 Billion in Financial Aid to Nepal

The World Bank (WB) has lifted its hand to support Nepal again. This time, it has renewed its support to Nepal under the Second Programmatic Fiscal and Public Financial Management Development Policy Credit Project.

In a move supporting Nepal’s efforts towards fiscal federalism and developing public financial management, WB offered the country a grant of NPR USD 100 million for the fulfillment of reform actions developed by the Ministry of Finance.

Nepal Finance Ministry Secretary Lal Shankar Ghimire and World Bank Country Manager-Nepal Faris H Hadad-Zervos signed the agreement at the Ministry of Finance.

“We are thankful for the support of the World Bank and development partners in the ongoing and dynamic process of federalism in Nepal,” stated Secretary Ghimire.

“Nepal’s transition to a federal state is an ambitious agenda and the WB Group is committed to supporting the government in fulfilling this goal. The sustainability of the proposed reforms under this budget support is a critical aspect. The partnership between the government and development partners will further enable strengthening of public institutions, inclusion and resilience as Nepal progresses with the federalism agenda,” said Hadad-Zervos.

Nature of the Project

The project which aims to support reforms in building Nepal’s federalism agenda is categorized under two pillars.

The first pillar aims to support measures in establishing fiscal federalism in Nepal through various legislations, policies and regulations.

The first pillar will dictate budget execution and create the basis of model laws, to be adopted by local governments to govern their budget processes.

The second pillar will support reforms to strengthen policy framework for public finance management at sub-national levels. This can be achieved through legislation and regulations that govern the budget cycle and promote transparency to citizens, besides:

• Guiding preparation of the Medium-Term Expenditure Framework
• Strengthening expenditure control
• Supporting development of revenue collection system
• Introducing Gender-responsive budgeting
• Formulating measures to improve Nepal’s response to climatic shocks

This project will be built on the reforms supported by the first Development Policy Credit for creating legal frameworks to govern resource allocation across the three levels of government and assist the operations of local governments, besides strengthening budget execution and public financial management systems at the federal level.