Kathmandu. KATHMANDU: The Asian Development Bank (ADB) has decided to provide concessional loan amounting to USD 100 million to implement fiscal federalism, strengthen public financial management and reform the budget system of all three tiers of government.

The loan is being provided for sub-programme-2 under the Public Financial Management Strengthening and Service Delivery Improvement Programme.

The loan agreement was signed by the Secretary of the Ministry of Finance, Dr Ghanashyam Upadhyaya, and ADB Country Director for Nepal Arno Koswa. The amount to be provided by ADB as policy-based loan will be provided to the Government of Nepal as budgetary support.

As per the agreement, the loan repayment period will be 24 years and grace period will be 8 years. The interest rate will be 1 per cent during the grace period till February 1, 2034 and then 1.5 per cent.

Finance Secretary Dr Upadhyay said that the government’s main goal was to build a strong financial management system, saying the Public Finance Management Strengthening and Service Delivery Improvement Program was directly linked with federalism. He said, “The programme is focused on improving the budget formulation, implementation and result-oriented management of all three tiers of government as per the federal set-up.” This will improve the overall budget process and make public service delivery effective. ”

The programme is expected to advance inclusive and result-oriented development by reforming public procurement system, promoting fiscal discipline, revenue collection, capacity building and making local levels more efficient.

ADB Country Director for Nepal, COSWA, said the concessional loan would be focused on improving Nepal’s financial governance. According to him, the loan amount would be used for the development of a resource planning system, information management system for public corporations, medium-term expenditure structure development and technology-friendly tax system through collaboration in legal, institutional and technical reforms related to public financial management.

“This programme will ensure fiscal sustainability and make the revenue system more efficient,” he added. It will also help in the management of potential financial risks. It will contribute significantly to the improvement of Nepal’s overall economy and sustainable development. ”