The board of executive directors of the World Bank Group (WBG) on Tuesday approved a new Country Partnership Framework (CPF) for Nepal for the next five years with the aiming of securing a stable path to federalism and an inclusive and prosperous future.

In the CPF, the multilateral lender pledged to support institutions that are critical to the effective implementation of federalism and innovative pathways to faster, equitable growth and accountable service delivery.  

Shri Krishna Nepal, chief of the International Economic Cooperation Coordination Division of the Finance Ministry, told the Post that the multilateral lender approved the CPF with a commitment to increase financial assistance significantly in the next five years.

The CPF noted that the federalism agenda would underpin the World Bank Group’s future programmes at the strategic, policy and operational levels. It also cautioned that transitional vulnerabilities could heighten in the early days of federalism as development roles are adjusted, and the new structures take root.

Against this background, the CPF focuses on three areas of engagement: (i) Strengthening public institutions for economic management, service delivery and public investment; (ii) Promoting private sector-led jobs and growth; and (iii) Enhancing inclusion for the poor, vulnerable, and marginalised groups, with greater resilience against climate change, natural disasters and other exogenous shocks.    

“This partnership strategy with the World Bank supports our goal of giving every Nepali equal access to security, justice, good governance, basic services and an opportunity to participate in our future prosperity,” said Finance Minister Yuba Raj Khatiwada.

“The new partnership strategy with the World Bank Group is focused on supporting our transition to federalism, and fits squarely within our vision and underpins a Nepali-owned model.”

According to the framework, Nepal will require significant financing—over and above the public and development aid resources currently available—to achieve faster growth and accelerate poverty reduction in the context of its transition to federalism.

The CPF stated that the government’s development model of growth, fueled by higher levels of investment, productivity and effective public institutions to underpin private sector dynamism, would require carefully calibrated reforms to draw in private investment in parallel with the implementation of federalism. “Nepal’s transition to federalism unlocks opportunities for all citizens to participate in its development,” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal.

“This represents a window of opportunity for the country to further reduce poverty, increase the income of the bottom 40 percent, and pursue its ambitious agenda of inclusive growth and accountable service delivery.”

Meanwhile, the board also approved a fourth Financial Sector Stability Development Policy Credit of $100 million to help Nepal continue to deepen its medium-term reform programme in the financial sector.

The $100 million policy, approved by the multilateral lender, is the final in a series of financial sector development policy credit initiated in 2013. It has been supporting a government-led programme aimed at stabilising the sector by reducing vulnerabilities and increasing transparency.

In this phase, the programme has focused on implementing key reforms through a strengthened legal and regulatory framework, consolidating the financial sector, placing the financial sector safety net on a firm footing and laying the ground for a further programme of reforms to broaden and deepen access to financial services for both businesses and individuals.