Nepal's journey towards fiscal federalism has been marked by significant progress, but there is still a long way to go. The World Bank, in its first annual Nepal Fiscal Federalism Update, has highlighted the need for further reforms to strengthen the regulatory framework, institutional setup, human resource capacity, and public financial management systems at the provincial and local levels. This article delves into the World Bank's recommendations and explores their potential implications for Nepal's fiscal federalism journey.
The State of Fiscal Federalism in Nepal
Fiscal federalism in Nepal has made considerable strides, with the country transitioning from a unitary system to a federal structure. This shift has been instrumental in promoting local governance and ensuring that resources are allocated more equitably across the country. However, the World Bank report underscores that more needs to be done to fully realize the potential of fiscal federalism in Nepal.
The Need for a Fiscal Federalism Roadmap
The World Bank report emphasizes the need for a fiscal federalism roadmap in Nepal. This roadmap should outline a clear set of actions, sequence, timeline, and responsible actors to improve fiscal federalism outcomes in the country. According to Balananda Paudel, Chairperson of the National Natural Resource and Fiscal Commission, such a roadmap is crucial for guiding the country's fiscal federalism journey and ensuring that all stakeholders are aligned towards the same goals.
Strengthening the Regulatory Framework and Institutional Setup
One of the key recommendations of the World Bank report is to strengthen the regulatory framework and institutional setup for fiscal federalism in Nepal. This involves clarifying the concurrent and shared responsibilities among the three tiers of government – federal, provincial, and local. A clear regulatory framework is essential for ensuring that each level of government understands its roles and responsibilities, thereby promoting effective governance and resource allocation.
Building Human Resource Capacity and Improving Public Financial Management Systems
The World Bank report also highlights the need to build human resource capacity and improve public financial management systems at the provincial and local levels. This is crucial for ensuring that these levels of government have the necessary skills and systems in place to effectively manage their resources and deliver public services.
The World Bank's recommendations provide a valuable roadmap for strengthening fiscal federalism in Nepal. By implementing these recommendations, Nepal can further enhance its regulatory framework, institutional setup, human resource capacity, and public financial management systems, thereby promoting effective governance and equitable resource allocation. As Nepal continues its journey towards fiscal federalism, these recommendations offer a valuable guide for navigating the challenges and opportunities that lie ahead.