The Asian Development Bank has approved a $100 million policy-based loan to advance public financial management reforms in Nepal.

The loan will be used for improved public expenditure and debt management at the national level and enhanced resource planning, financial management, and devolved service delivery at the subnational level, the ADB said in a statement.

“The programme will catalyse reforms which will strengthen fiscal sustainability, improve governance, and empower local governments,” said ADB Country Director for Nepal Arnaud Cauchois. “By enabling local governments to plan and raise revenues more effectively, it will reduce dependency on central transfers, advance Nepal’s federal governance framework, and build long-term resilience.”

The initiative aligns with the government’s five-year plan and builds on ADB’s previous policy-based concessional support to reinforce Nepal’s fiscal governance and advance decentralisation reforms.

The programme will strengthen fiscal sustainability and fiscal federalism by increasing fiscal space through expenditure rationalisation, revenue generation, fiscal risk reduction, innovative financing, and improved management and governance of public enterprises.

Key reforms at the national level include operationalising Nepal’s first fiscal risk and strategy report, assessing contingent liabilities of state-owned enterprises, and institutionalising annual borrowing plans in line with the medium-term debt strategy. The government is also implementing management and governance policy, and loan and share investment policy for public enterprises, while upgrading the Public Enterprises Management Information System for real-time monitoring and oversight.

Additionally, the Public Financial Management (PFM) reform strategy and the integrated PFM system are being operationalised. These reforms are expected to contribute to improved expenditure planning and management, as well as a reduction in fiscal risks.

To bridge Nepal’s development financing gap, the programme will help establish an Alternative Development Financing Fund to mobilise domestic and international capital—including bonds, equity investments, and remittance pools—for resilient infrastructure development.

At the subnational and local levels, reforms include digitising the taxpayer registration system for provincial governments, operationalising the digitised local revenue administration system, operationalising the public asset management system, formulating market-based property valuation criteria, and mapping natural resources with revenue-generating potential.

Additionally, the development of local project banks and medium-term expenditure frameworks that are gender and climate-responsive will support coordinated planning and strategic public investment decisions. These reforms will contribute to increased revenue and improved resource planning and management at the subnational and local levels.