The Asian Development Bank (ADB) on Friday approved a $100 million policy-based concessional loan to strengthen Nepal’s fiscal management and to promote decentralisation.

The strengthening public financial management and devolved service delivery programme supports structural fiscal transformation until 2025 through significant reforms related to expenditure and debt management at the federal level, and resource planning and management at the subnational level.

A post-programme partnership framework will guide the sustainability of the reforms beyond 2025.

“This ADB programme will introduce reforms to enhance the quantum and quality of capital spending, reform public enterprises to mitigate fiscal risks, digitise to enhance fiscal transparency and efficiency, leverage additional resources from development financing institutions, and implement a gender- and climate-responsive medium-term expenditure framework at the subnational level,” said ADB Public Management Economist Chandan Sapkota.

ADB has been supporting Nepal to improve expenditure and debt management.

Policy reform actions that support this include institutionalisation of a fiscal policy statement, approval of legal framework and strategy for debt management, public enterprises reform, electronic government procurement including contract management, and digitization of expenditure recording and reporting at the three tiers of government.

The programme includes approval of a fiscal risk and strategy report and its operationalisation, transparency in debt management and implementation of an annual borrowing plan, improvement in governance and management of public enterprises, and implementation of a medium-term public financial management reform strategy.

“The ADB programme will support institutionalisation and operationalization of devolved public services to strengthen fiscal federalism as outlined in the 2015 constitution,” said ADB Public Management Specialist Rachana Shrestha.

“To help strengthen local governance and the delivery of devolved services, the programme will strengthen policy reforms aimed at improving resource generation capabilities of subnational governments.”

The programme will also help municipalities revise and update the property tax rate to boost revenue, implement a gender and climate-responsive medium-term expenditure framework, and improve public investment management.

It will support the establishment of an IT-based model taxpayer registration system and public asset management system.

ADB will provide an additional $1.5 million technical assistance grant from its Technical Assistance Special Fund to support the implementation of policy actions and institutional strengthening.

It will also support the implementation of the post-programme partnership framework.