KATHMANDU, April 9: As the government faces a massive crunch to finance the ongoing development projects, it has stepped up efforts to mobilize large amounts of funds collected for social security and insurance purposes.
The government has been struggling to generate adequate revenue necessary to finance the immediate liabilities and development works. The records with the Financial Comptroller General Office show that the government as of Tuesday has collected only 55.55 percent of the revenue target of Rs 1.419 trillion for the current fiscal year.
Until a few months ago, the contractors failed to get the backlog dues of last year cleared by the government. The government has been under scrutiny for providing the contracts without ascertaining the financing sources. Citing the problem, construction entrepreneurs have been hesitating to assume new contracts for development works assigned by the government.
Govt looks forward to expedite MCC projects on its own
The government in this regard has proposed implementing the Alternative Development Finance Fund, with the aim of employing mechanisms such as venture capital, mutual funds, project-specific bonds, remittance funds and incubation funds. A Cabinet meeting held at Singha Durbar on Monday evening endorsed the related bill to take forward the alternative financing strategy.
Speaking at a program on Tuesday, Finance Minister Bishnu Prasad Paudel said the government will present the bill in Parliament soon for final approval. According to him, provided the bill is endorsed, a fund of Rs 100 billion will be established, which will be used to invest in large-scale projects.
While the authorized capital of the fund will be Rs 100 billion, the paid-up capital will stand at Rs 25 billion. The fund is expected to finance development projects amounting to approximately Rs 400 billion annually.
The government of Nepal will hold 51 percent ownership in the fund. Various funds including those with Employee Provident Fund, Citizen Investment Fund, and Social Security Fund are proposed to hold a 25 percent share. Similarly, life insurance companies, non-life insurance companies, and reinsurance companies will receive 24 percent of the shares.
Finance Minister Paudel stated that the purpose of this bill is to attract investment from the private sector of both domestic and foreign investors for the development of public infrastructure. “It will also facilitate fundraising for specific projects via methods like crowdfunding, securitized loans, and long-term capital investment funds sourced from both domestic and foreign investors,” said Paudel.
If a shareholder of the fund wishes to sell their shares, other groups within the same structure can purchase them. In case if no group opts to buy the shares, the government will take the final decision. International governmental or intergovernmental financial institutions interested in purchasing shares can do so based on a committee’s recommendation and the Council of Ministers’ approval, with such transactions published in the Nepal Gazette.
As per the government plan, the alternative development finance will be channeled into sectors such as energy, electricity, infrastructure, industrial parks, dry ports, information technology, tourism, urban infrastructure, and public digital infrastructure. Investments will also be made in other feasible projects identified by the fund that offer high economic returns.
