Strengthening Fiscal Decentralization in Nepal’s Transition to Federalism

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This report reviews the progress of regulatory and policy reforms in Nepal and offers lessons to help refine the country’s fiscal federalism framework according to the provisions of the 2015 Constitution.

Nepal has taken concrete steps to shape intergovernmental relations reflecting fiscal decentralization since the 2015 Constitution was introduced. Legislative elaboration and implementation of federalism are advanced, yet multiple challenges still need to be addressed. Lessons identified in this report can help the Government of Nepal adopt and refine its fiscal federalism framework, as well as support stakeholders contemplating a similar state transition in other countries.