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Unpublished Paper
Fiscal Decentralization Stocktaking Study in Nepal: Final Report
  • Roy Kelly, Duke University
Nepal is in the midst of a major political, administrative and fiscal restructuring reform moving towards a federal government structure to enhance governance and improve public service delivery. These ongoing efforts are being formulated against the background of the current sub-national governance structure which is largely based on the 1999 Local Self Governance Act (LSGA). The LSGA was a major decentralization reform at the time, introducing a number of key reform initiatives. Despite these bold initiatives under LSGA, however, the Nepalese government structure remained highly centralized, unable to address many of the pressing governance and service delivery problems. In fact, the underperformance of the LSGA and related reforms was partially an impetus for the ongoing effort to restructure Nepal into a federal governance system, seeking to clarify and reestablish the political, administrative and fiscal dimensions of government in order to enhance efficiency, effectiveness and accountability. To support this ongoing reform process, the Local Bodies Fiscal Commission (LBFC) launched this study to shed light on the state of fiscal decentralization in Nepal. Under the Local Governance and Community Development Program (LGCDP), with funding from the United Nations Capital Development Fund (UNCDF), this study was undertaken to take stock of the state of fiscal decentralization as originally intended under the LSGA, identify lessons learned and suggest opportunities for ensuring successful fiscal decentralization policies and transition measures to the governance structures anticipated under the new constitution. This study highlights the extent to which the local bodies are exercising the fiscal decentralization provisions provided under the LSGA and identifies key recommendations needed to facilitate the effective transition with regards to fiscal decentralization from the current unitary government structure to the expected devolved federal government structure under the new constitution. The study lays the foundation for further detailed work on the functional analysis of sub-national expenditure and revenue responsibilities which will be closely aligned with the work undertaken by the Administrative Restructuring Commission (ARC).
  • fiscal decentralization,
  • local government,
  • local government finance,
  • intergovernmental transfers
Publication Date
Citation Information
Roy Kelly. "Fiscal Decentralization Stocktaking Study in Nepal: Final Report" (2011)
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