They are (i) revenue sharing, (ii) fiscal equalisation grants, (iii) conditional grants, (iv) sharing of royalty from natural resources, and (v) internal loans.Įxcept for internal loans, the other four provisions of fiscal transfer appear to have proven less contentious to implement.
Nepal’s fiscal federal design has instituted five key components to make fiscal federalism operational and, ideally, enhance growth and well-being.
Due to the federal construct, the remaining three pillars are essentially meant to facilitate the full and unhindered implementation of fiscal federalism. Undoubtedly, economic growth, infrastructural development and popular well-being under any federal system are contingent upon the successful implementation of fiscal federalism. A year after a new set of elected executives in legislatures/governments took office, it is safe to argue that fiscal federalism is better functional than the other three pillars of federalism-constitutional, political and administrative.
Eight years after Nepal’s federal constitution was promulgated and six years after federalism was implemented, whether the federal polity in general and fiscal federalism in particular could deliver on the promise of speedy prosperity for the nation is now cardinal.
