The World Bank signaled strong support for Nepal’s ambitious transition to federalism when its Board of Executive Directors approved a $200 million credit to improve public financial management.
The Fiscal and Public Financial Management Development Policy Credit is the first in a two-part program to support the Government of Nepal in establishing a framework for fiscal federalism and improved public financial management.
“Nepal today is at a historic juncture as it transitions from a unitary to a federal democratic republic. Expectations are high that the new structure will deliver on greater equity and accountability,” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal. “This operation will help establish a fiscal framework that will ensure that the newly elected governments can deliver better services to all Nepali citizens.”
This operation will support implementation of the Intergovernmental Fiscal Arrangement Act; establishment of the National Natural Resources and Fiscal Commission; adoption of the Fiscal Responsibility and Budget Management Bill; strengthening of public financial management systems; improvements in budget execution; and reforms to improve revenue collection.
Commending Nepal for successfully concluding local, state and federal elections under the new constitutional framework, the Executive Directors welcomed the Bank’s strategic shift to supporting federalism to help avoid disruptions, improve service delivery and promote transparency and accountability. Directors encouraged the Bank to fully support Nepal’s transition to achieve inclusive development, especially in traditionally underserved areas, in coordination with other development partners.
This Development Policy Credit approved today is one of several components in the World Bank’s overall support on federalism in Nepal. Other support includes policy advice, new investment lending to improve service delivery and improve capacity, as well as restructuring of the existing portfolio to align with the new federal structure.
The World Bank also approved a $66 million credit to modernize Phase 2 of the Rani Jamara Kulariya Irrigation Scheme. The project will modernize sub-branches, tertiary canals and water courses so that irrigation water can reach farmer fields with optimal flows. It will also help strengthen Water User Associations and provide agriculture production support.
During Phase 1, which closed in September 2017, the project upgraded intakes and feeder canals and initiated an agriculture development program. Spread over a command area of 14,300 hectares, the project will benefit one of the poorest areas in the southwest of the Karnali basin in the Tarai. Nearly half of the people benefitting from the project belong to the indigenous Tharu community.