Federalism and Public Expenditure for Human Development in Nepal : An Emerging Agenda

Nepal has made significant progress across many human capital dimensions in the past twenty years, though shocks remain a threat to achievements. The current Coronavirus (COVID-19) outbreak has adversely affected the economy and the delivery of essential services, which can have significant long-term impact on human capital. This public expenditure review is structured as follows. After the introduction, Chapter 1 presents briefly the few stylized facts about progress in human capital indicators, key persisting challenges, and important disparities along geographic and socio-economic lines. Chapter 2 then reviews briefly national level spending in social sectors, as well as broad issues in service delivery. Turning to federalism, Chapter 3 presents the allocation of functions across levels and highlights the issues. Chapter 4 then discusses the allocation of resources across three levels and identifies potential limitations. Chapter 5 focuses on actual service delivery at the local level, identifying challenges in implementation. Chapter 6 concludes this report by proposing ten recommendations which will be critical for Nepal to address the structural issues in human development, which have recently been highlighted by the Coronavirus (COVID-19) crisis. Addressing these chronic issues will be essential to put Nepal on a path towards green, resilient, and inclusive development (GRID)