ADB to provide $100m concessional loan to support Nepal’s fiscal federalism
KATHMANDU: The Asian Development Bank (ADB) is set to provide Nepal with $100 million in concessional loan aid to support the implementation of fiscal federalism, strengthen public financial management and improve budgetary systems across all three tiers of government.
The loan will be provided under Subprogram–2 of ADB’s Strengthening Public Financial Management and Devolved Service Delivery Programme. Finance Secretary Ghanshyam Upadhyaya and ADB Country Director for Nepal Arnaud Cauchois signed an agreement on behalf of their respective institutions during a programme held at the Ministry of Finance on Wednesday.
The policy‑based loan will be provided as budgetary support to Nepal. According to the agreement, the loan will have a repayment period of 24 years, including a grace period of eight years. The interest rate will be 1% until February 1, 2034, after which it will increase to 1.5%.
Speaking on the occasion, Finance Secretary Upadhyaya said strengthening public financial management and improving service delivery are directly linked to federalism, and that establishing a robust fiscal management system is one of the government’s major objectives.
The programme focuses on improving budget formulation, implementation and results‑based management across all three levels of government. According to the finance secretary, this is expected to enhance the overall budgetary process and make public service delivery more effective.
Implementation of the programme is also expected to improve the public procurement system, promote fiscal discipline and revenue generation, strengthen institutional capacity and further empower local governments, thereby advancing inclusive and results‑oriented development.
ADB Country Director Cauchois said the concessional loan is aimed at improving fiscal governance. He added that the programme will strengthen fiscal sustainability and fiscal federalism by expanding fiscal space through expenditure rationalisation, increased revenue generation, reduced fiscal risks, innovative financing, and improved management and governance of public enterprises.
The agreement signing ceremony was attended by employees and officials of the Ministry of Finance as well as officials from the ADB.
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