KATHMANDU, Dec 6: The World Bank (WB) has pointed out the need to introduce five key reform measures to support Nepal’s fiscal sustainability and its transition towards green, resilient, and inclusive development.
Unveiling the Public Expenditure Review (PER) Report on Fiscal Policy for Sustainable Development on Monday, the multilateral lending institution has identified five top priority reform measures for the purpose. It has stressed on encouraging the update of sub-national spending responsibilities through the intergovernmental grants system.
Supporting exports and job creation through reforms to import duties, strengthening domestic revenue including a review in VAT exemptions, enhancing public capital spending by rolling out the National Project Bank and providing fiscal incentives for a green growth transition are among measures that WB has recommended to achieve the goal.
The WB has stated that Nepal has made significant strides in implementing fiscal federalism. It has expressed its concern over excessive dependency of the sub-national governments on the intergovernmental transfers and revenue sharing, which accounts for around 30 percent of the annual budget, to fulfill their financial demands.
“While federalism is helping bring policymaking closer to the people, it has also increased fiscal spending and (exacerbated by the COVID-19 pandemic) led to a sharp rise in fiscal deficits and public debt,” reads the report.
The report also stresses the importance of strengthening investment processes and fiscal policies for green growth, and fiscal policy reforms to enable Nepal to use its green electricity surplus to mitigate air pollution to protect the health of people and the economy.