ADB to Provide USD 100 Million Concessional Loan to Support Fiscal Federalism in Nepal

The Asian Development Bank (ADB) is set to extend a USD 100 million concessional loan to Nepal to support the implementation of fiscal federalism, strengthen public financial management, and improve budgetary systems across all three tiers of government.

The loan will be provided under Subprogram-2 of ADB’s Strengthening Public Financial Management and Devolved Service Delivery Programme.

Finance Secretary Dr Ghanashyam Upadhyay and ADB Country Director for Nepal Arnaud Cauchois, representing their respective institutions, signed an agreement to this effect at the Ministry of Finance on Wednesday.

The policy-based loan will be provided as budgetary support to Nepal. Under the agreement, the loan carries a repayment period of 24 years, including a grace period of eight years. The interest rate has been fixed at one percent until February 1, 2034, after which it will rise to 1.5 percent.

Speaking at the signing ceremony, Finance Secretary Dr Upadhyay said strengthening public financial management and improving service delivery are closely linked to federalism. He added that establishing a robust fiscal management system remains one of the government’s key priorities.

The programme aims to improve budget formulation, implementation, and results-based management across federal, provincial, and local governments. According to the Finance Secretary, this is expected to enhance the overall budgetary process and make public service delivery more effective.

The programme is also expected to improve the public procurement system, promote fiscal discipline and revenue generation, strengthen institutional capacity, and further empower local governments, thereby advancing inclusive and results-oriented development.

ADB Country Director Cauchois said the concessional loan is aimed at improving fiscal governance. He added that the programme would strengthen fiscal sustainability and fiscal federalism by expanding fiscal space through expenditure rationalisation, increased revenue mobilisation, reduced fiscal risks, innovative financing, and improved governance of public enterprises.

Officials and employees of the Ministry of Finance, along with representatives of the Asian Development Bank, were present at the signing ceremony. -- RSS