Fiscal Federalism in Nepal

With the transition from a unitary structure to a federal structure, there are many opportunities as well as challenges that lies ahead to Nepal. One of the most important challenges that Nepal currently faces is the management of various fiscal aspects under federal structure for successful implementation of Federalism. This paper attempts to study existing fiscal arrangement (assignment of expenditure responsibilities and revenue rights among various tiers of government) and intergovernmental fiscal transfers among various tiers of government. Furthermore, this paper has attempted to study various principles of fiscal federalism and has also used the series approach to compare six federations and their workings on the above-mentioned topic. Finally, the paper has also identified various issues that need to be dealt with and has proposed some reforms to deal with these issues to help advance the timely and balanced implementation of Federalism in the country.

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