Facing a significant financial crunch, the Government of Nepal has accelerated efforts to tap into large pools of funds collected for social security and insurance, aiming to support stalled development projects.
Despite growing liabilities and delayed payments, the government has struggled to meet its revenue targets. According to the Financial Comptroller General Office, only 55.55 percent of the annual revenue target of Rs 1.419 trillion had been collected as of Tuesday in the current fiscal year.
The funding shortage has had ripple effects on infrastructure development. Until recently, contractors were unable to recover payments for previous works, prompting widespread hesitation among construction firms to take on new government projects. The government has also come under scrutiny for awarding contracts without securing adequate financing sources.
In response, the government has proposed the establishment of the Alternative Development Finance Fund, aimed at mobilizing funds through mechanisms like venture capital, mutual funds, project-specific bonds, remittance-backed investments, and incubation funds. A Cabinet meeting held at Singha Durbar on Monday endorsed a bill to formally launch the fund.
Finance Minister Bishnu Prasad Paudel, speaking at a public event on Tuesday, confirmed that the bill will be presented in Parliament soon for final approval. Once enacted, the fund will have an authorized capital of Rs 100 billion and a paid-up capital of Rs 25 billion. It is expected to finance development projects worth around Rs 400 billion annually.
The ownership structure of the fund will be as follows:
- Government of Nepal: 51%
- Employee Provident Fund, Citizen Investment Trust, Social Security Fund: 25%
- Life and non-life insurance companies, including reinsurance firms: 24%
Minister Paudel emphasized that the fund aims to attract both domestic and foreign private sector investment in public infrastructure. It will also support innovative fundraising methods such as crowdfunding, securitized loans, and long-term capital investment funds.
If a shareholder wishes to divest, other stakeholders within the fund will be given the first right of refusal. If none opt to purchase, the government will make the final decision. Foreign governmental or intergovernmental financial institutions may also acquire shares upon the recommendation of a committee and approval by the Council of Ministers, with all such transactions published in the Nepal Gazette.
The fund’s investments will target high-impact sectors, including energy, electricity, industrial parks, dry ports, IT infrastructure, tourism, urban development, and public digital infrastructure. Additional projects offering strong economic returns may also be funded based on feasibility assessments.
