19-Point Commitment Unveiled to Reinforce Nepal’s Fiscal Federalism

The Province Council of Economic Affairs has issued a 19-point commitment paper aimed at strengthening fiscal federalism through greater budget discipline, efficient administration and stronger coordination among the provinces.

The meeting, inaugurated by Chief Minister Mangal Bahadur Shahi, concluded on Monday with the provinces agreeing to pursue measures aimed at making fiscal federalism more effective and sustainable.

The commitments include ensuring the constitutional guarantee of fiscal equalization grants, ending federal interference in small projects implemented by sub-national governments, reviewing revenue and royalties from natural resources, and transferring authority over traffic fines and vehicle inspection-related matters.

The meeting also called for eliminating duplication of government structures, removing administrative and legal hurdles, simplifying procedures related to foreign assistance and loans, reviewing the SUTRA system of the National Natural Resources and Fiscal Commission, and conducting a legal review of fiscal federalism.

The commitment paper also emphasizes consultation on public financial management and the pre-budget process, stronger relations with local governments, efficient provincial mechanisms, increased internal revenue, and inter-provincial interdependence.

Good governance, transparency, and the adoption of a common stance among provincial governments have also been highlighted as key priorities.

The paper was signed by the ministers for Economic Affairs and Planning from Koshi, Madhes, Bagmati and Lumbini provinces.

Chairman of the Federalism and Localization Centre, Dr. Khim Lal Devkota, delivered a presentation on intergovernmental coordination for strengthening fiscal federalism.

He highlighted good practices adopted by provincial governments, the status of implementation, existing challenges, and possible ways forward for improving the functioning of fiscal federalism.

Speaking at the inaugural session, Chief Minister Mangal Bahadur Shahi stressed the need for broader debate on how the Constitution and federal system can be implemented more effectively.

He said the effective implementation of federalism is directly linked to citizens' expectations and emphasized that provincial governments can become stronger and more effective when the principles of federalism are properly reinforced.