The Town Development Fund of Nepal organized a national conference on Municipal Finance jointly with the Ministry of Federal Affairs and Local Development (MoFALD) and the Ministry of Urban Development (MoUD) that took place on December 20 in Kathmandu at Hotel Annapurna. The national conference, which was supported by the UN Capital Development Fund (UNCDF) and the German Federal Enterprise for International Cooperation (GiZ), discussed how to address the rapid urbanization that has created a wide annual financing gap of about NPR 1 billion.

The conference was inaugurated by Honorable Deputy Prime Minister and Finance Minister, Mr. Krishna Bahadur Mahara, who noted that urban cities will be drivers of growth as Nepal evolves. The conference brought together policymakers and academics, practitioners and regulators across and outside the country, to discuss recent research works and good practices on municipal finance, particularly in local tax and user fees, inter-governmental fiscal transfer, subnational borrowing, municipal bond and PPP financing.

Participants agreed that the fiscal space at the subnational level would need to be enhanced in coming years through the mobilization of domestic resources for urban infrastructure development and enhanced domestic private sector competitiveness through integration of local, regional and national value chains.

Dr. Som Lal Subedi, Chief Secretary, Office of the Prime Minister, acknowledged the importance of municipal finance and expressed his commitment to support initiatives to promote municipal finance in Nepal.  Speakers from the Town Development Fund (TDF) and other relevant Nepali institutions agreed that strengthening municipal finance is particularly relevant in the context of realizing the Sustainable Development Goals (SDGs) as well as the National Urban Development Strategy for 2030 that the government has approved. 

The conference focused on both capacity constraints in terms of revenue generation and management and regulatory or legislative obstacles of municipalities. It was widely acknowledged that the private sector has a significant role to play in infrastructure financing in Nepal, but central and local governments need to take strong initiative in order to tap into their investment potential. The participants agreed that this is a window of opportunity for Nepal in light of the promulgation of Nepal’s Constitution in 2015, that gives new functions to municipalities against which more funding and financing capacity needs to follow. As new laws are being drafted, the aggregation of ideas from different experts at the conference has been useful to feed into policy inputs.

UNCDF was represented by Dr. Vito Intini, Municipal Finance Programme Manager, and Dr. Suresh Balakrishnan, Regional Technical Advisor and Mr. Iqbal Abdulla Harun, Senior Advisor, UNCDF Bangladesh. The main messages from UNCDF focused on the point that increased fiscal space fundamentally hinges on two prerequisites: i) adequate, timely and predictable intergovernmental fiscal transfers and, ii) sound public financial management systems. They are both critical in order to tap into the debt market and to attract the private sector in project financing investments. During the closing session, Mr. Kedar Bahadur Adhikari, Secretary, MoFALD, reiterated on the need to ensure and strengthen the capacities of municipalities in fiscal discipline, public financial management and developing integrated plans.

The conference included a series of workshops run in two parallel sessions where about 130 participants discussed current issues of municipal finance. The conference has also produced a number of policy papers that will feed into a joint publication.