New World Bank Report Identifies Reforms to Improve Public Expenditure for Human Capital

KATHMANDU / Nepal has made significant progress in human capital development, though key challenges remain in the health, education, and social protection sectors, which have been exacerbated by the COVID crisis. Nepal’s transition to a federal state presents an opportunity to promote greater human capital accumulation, but it requires significant investment and improved efficiency in spending, states the World Bank’s report “Federalism and Public Expenditure for Human Development in Nepal: An emerging agenda” launched virtually today.

While federalism is helping bring policymaking and service delivery closer to the people, it can be further strengthened through a clear definition of responsibilities of each level of government and ensuring the systems and resources are in place for their implementation, states the report.

“This report provides a comprehensive review of the challenges facing Nepal’s human development sectors in the federal context”, stated Mr. Madhu Kumar Marasini, Finance Secretary. “The recommendations are aligned with our national development plans and will inform and support our ongoing efforts to ensure all levels of government have the means and tools to perform their key functions in the delivery of core services in education, health, and social protection.”

The Public Expenditure Review (PER) identifies key reforms to help Nepal improve human capital outcomes in the federal context: (i) addressing gaps in programming, including economic inclusion for the poor, and mainstreaming delivery processes; (ii) clarifying roles of different levels of government and ensuring standards are implemented; (iii) improving management processes and systems, including a social registry; (iv) introducing incentives to promote good management practices; and (v) addressing human resource challenges to ensure that subnational governments have the capacity to efficiently deliver quality services.

“The World Bank is committed to continue supporting government reforms to improve human capital outcomes, drawing on the recommendations of this Report, as well as the Public Expenditure Review Report on Fiscal Policy for Sustainable Development launched in December 2021,” said Mr. Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka. “Human capital is one of the pillars of our Country Partnership Framework, and the implementation of key reforms will be supported through our technical dialogue and financial investment in the health, education and social protection sectors, as well as through our various Development Policy Credits.”

“Human capital is at the heart of the green, resilient, and inclusive development (GRID) approach adopted by Nepal”, said Dr. Biswo Nath Poudel, Vice-Chairman of the National Planning Commission.  “The sustainability of development, adaptation to risks, and reduction of disparities (inclusive) all require addressing the structural issues that hamper further improvements in human development outcomes. The report’s recommendations aim to contribute to further advance Nepal’s GRID agenda in this regard”.