Municipal Public Finance in Nepal

Transcription

1 Government of Nepal Ministry of Urban Development Municipal Public Finance in Nepal Chakravarti Kanth Project Director Secondary Town Integrated Urban Environmental Improvement Project (STIUEIP) Integrated Urban Development Project (IUDP) Regional Urban Development Project (RUDP)

2 Outline Urban Scenario in Nepal Overview of Municipal Public Finance in Nepal Analysis of Past experience & Lessons Way Forward

3 Urban Scenario in Nepal 293 Municipalities (6 Metropolitan Cities + 11 Sub-metropolitan Cities Municipalities) 60 percent urban population (Municipal population?) 70 % of 293 municipalities are dominantly rural character with population density less than 5 persons per hectare. Urban Infrastructure Condition Index (UICI) of majority (32) of previous 58 established municipalities is less than 50 of a possible 100.

4 Trend of Central Resource Allocation in Urban Sector MoUD MWSS MoFAGA MoPIT IGFT Amount in NPR in Billion

5 Legal Documents Related to Municipal Finance Intergovernmental Fiscal Management Act 2017 National Natural Resources & Fiscal Commission Act 2017 Local Government Operation Act 2017 National Urban Development Strategy 2017

6 Government Grant to Municipalities Fiscal Equalization Grant Conditional Grant (project based fund) Supplementary Grant (matching fund) Special Grant (Special Fund)

7 Scope of Municipalities in Own Source Revenue Policy, legal, regulation, standard & implementation of Property, Rental, Land registration, Vehicle, Service, Tourism, Advertisement, Business, Land revenue, Entertainment Fixation, collection & management of fee of Local infrastructure & services New touristic service & adventure Enlarging the scope & promotion of local revenue Collection of fee from sale & export of natural & mine resources Incentive for local revenue promotion Policy, legal, regulation, standard & implementation of control of revenue leakage Collection of land revenue Other services related to tax & service

8 Urban Finance Gap in Nepal Urban infrastructure demand Billions USD till 2031 ( Billions NPR) Whereas budget provision 0.64 Billion USD (70 Billion NPR) TDF study, percent of the demand is expected to be fulfilled by PPP/Private sector. US$ 47 per capita expenditure in urban infrastructure development (Very Low) NUDS, 2017

9 Past Experiences & Lesson Local Self Governance Act 1999 Local Self Governance Regulation 2000 Local Finance Business Regulation 2000 Local Level Fiscal Commission Implementation of Minimum Condition & Performance Measure (MCPM) Establishment of Town Development Fund (TDF)

10 Urban Finance Municipal Revenue Breakdown of Taxes as per % Contributions % Own source revenue (OSR) & 70 % from the central grant Vehicle ;jf/l ;fwg Taxs/ Business Joj;fo Tax s/ Land and 3/ huuf property s//psls[t Tax;Dklt s/ Rental jxfn s/ Tax Other cgo s/ Tax In total Own Source Revenue, the share of Local Tax revenue is 47.6% (Highest), followed by Service charge and fees (non tax ) is 42.4 % & Property rental contribution is 7.6% Source: Municipal Finance Framework for NUDS of Nepal, 2015

11 Our Approach and actions Government direct Funding to municipalities ADB with highest portfolio of 400M USD (14 municipalities) World Bank targeting for 250M USD (21 municipalities) AIIB expecting to invest with 100 M USD (7 municipalities) Cluster city program- 21 UIIP (AIIB TA Grant)- 7 RUDP- 4 IUDP- 4 STIUEIP- 6 Smart Cities - 13 UGDP- 6 (UGIIP 2 ) 16 New Town - 27 Mega City- 3 Mountainous town/settlement- 16

12 Lessons LSGA envisioned broader scope of local revenue. Municipalities were powerful but were collecting routine taxes. They were hesitant to broaden the scope of own source revenue. MCPM acted as administrative rather than developmental approach. Existence of Free riders tendency is prevailing. They are reluctant to pay back their loan to TDF. External & private sector investment in urban area is at lower level.

13 Challenges Elected body has taken responsibility almost after 2 decades. Institutional capacity of municipalities is still not strengthened. Due to federal restructuring, multitudes of reform is going on. Local revenue base is weak. Role of Provinces in infrastructure investment and land development is still to be explored for local level economy. Municipal governance is still focused to administrative approach rather to development approach. Weak database & Low collection efficiency. Invoice is raised only at the time of payment & they are not issued to the clients (for payment).

14 Way Forward Political Vision of Municipalities towards strong own source revenue is must. Paradigm shift is necessary from administrative approach to development. Function of 3 tiers of government based on cooperation & coexistence, as enunciated in Constitution of Nepal. Free Riders approach should be avoided. Widening municipal finance base by Strengthening revenue system, improving database, raising revenue collection efficiency. Paradigm shift for Central government To invest in cities & land transformation rather than to invest in projects. Development partners & private sectors should be attracted. Immediate operation of National Natural Resource & Fiscal Commission in full swing on evidence based is must. Mindset of Municipal bodies should be changed from dependency to central government towards implementing local government operation act.

15