Fiscal Federalism in Nepal

Nepal has gone through a major change into a system of federal republic democratic government. The basic innovation in the in the fiscal order will be the delineation of provincial and local governents in terms of their geographical boundaries, responsibilities and resources. There is likely to be a high degree of vertical and horizontal imbalance in expenditure and revenue assignment for the proper allocation of resources. These imbalances will need to be resolved by a mechanism of inter-governental fiscal transfers. This exercise will help the government to identify fiscal deficits at sub-national level and proposes feasible and sound fiscal policy options for strengthening federal Nepal. Ministry of Finance (MOF), National Planning Commission (NPC) and Natural Resource and Fiscal Commission (NNRFC) are important fiscal institutions of Nepal to transfer resources from Federal to lower level governments. The review of comparative components of fiscal federalism model and international experiences offers adequate space to link their strengths into real life of Nepalese people.