High-Level Economic Reform Recommendation Commission has given the following suggestions to the government of Nepal:
Immediate Actions:
- Enhance the efficiency and effectiveness of revenue administration (start immediately and continue).
- No loans will be provided to public institutions to pay salaries or other expenses.
- After the federal government allocates financial transfers, provinces and local levels will be guaranteed payment if expenditures are made accordingly.
- Halt permissions for opening new branches of cooperatives.
- Implement timely reforms in the system for issuing foreign study permits (NOC).
Actions to be Completed Within 6 Months:
A total of 12 tasks are to be completed within six months, including:
- Conduct awareness programs on anti-money laundering for citizens and employees of all three government levels.
- Remove projects like Lumbini Development Fund and Pashupati Development Fund from the list of national pride projects.
- Ensure investment from funds like Employees Provident Fund, Citizens Investment Trust, and Social Security Fund targets high-return projects.
- Reduce the interest rate spread between loans and deposits to reduce operational costs, increase capacity, and maintain financial stability in the banking system.
- Enact legal provisions to facilitate the issuance of long-term debt instruments for productive industries and large commercial infrastructure projects.
- Reduce fund management, registration, and issuance fees for private equity and venture capital firms by 50%.
- Develop an integrated information system for one-stop registration, renewal, updating, and regulation of firms, businesses, and industries.
- Set minimum national standards for housing provided as immediate relief to disaster-affected families.
- Establish a National Research and Development Council under the leadership of the National Planning Commission, with NAST and NARC as members.
- Allocate necessary budgets for the implementation of the Land Use Act, 2019, and its regulations, 2022, and enhance implementation capacity at all three government levels.
Actions to be Completed Within 1 Year:
A total of 71 tasks are to be completed within one year, including:
- Keep interbank interest rates close to the policy rate and gradually narrow the interest rate corridor band.
- Ensure positive real interest rates on deposits and maintain single-digit or low double-digit loan rates.
- Develop the bond market.
- Introduce alternative financing options to provide low-interest financial resources.
- Further reduce the spread between loan and deposit interest rates.
- Set the interest rate on productive loans at least one percentage point lower than on consumption loans.
- Maintain a unified credit information system for all types of banks, financial institutions, and cooperatives.
- Enable insurance companies to issue infrastructure bonds.
- Make house insurance mandatory when obtaining completion certificates for houses in urban areas.
- Facilitate the operation of a secondary market for government bonds.
- Restructure the Securities Board.
- Ensure automatic tax data sharing through effective coordination between the Office of Company Registrar and the Inland Revenue Department.
- Mandate that at least 60% of loans flow to productive sectors.
- Repeal and replace the Import and Export (Control) Act, 1956.
- Repeal and replace the Drugs Act, 1978.
- Merge the Immovable Property Acquisition Act, 1956, and the Land Acquisition Act, 1977, to issue a new Private Property Acquisition Act.
- Merge the Patent, Design and Trademark Act, 1965, and Copyright Act, 2002, to issue a new Intellectual Property Rights Protection Act.
- Keep the eligibility age for elderly allowance at 70 and require a national ID card to receive it.
- Restructure administration to align with the federal governance system.
- Bring expenditures of provinces and local levels under a single account system.
- When setting internal debt limits, calculate based on net amounts after subtracting the year's debt repayments.
- Identify and draft legal foundations to further clarify the division of powers among the three government levels.
- Transfer responsibilities that can be handled by provinces and local levels from the federal government and reduce staff and current expenditures accordingly.
- Amend the Nepal Rastra Bank Act, 2002; Bank and Financial Institutions Act, 2016; Deposit and Credit Guarantee Act, 2016; and the Remittance Regulations, 2010.
- Amend the National Natural Resources and Fiscal Commission Act, 2017, to clearly define royalties and manage distribution among all levels of government.
- Provide fertilizers, seeds, credit, and other support based on the National ID Card.
- Implement the land bank concept from the Land Act to utilize fallow agricultural land and reduce land idling.
- Modify the Environmental Protection Act, 2019, to provide different templates and processes for environmental studies based on project types.
- Establish a unified process for project area determination and report approval under the Environmental Protection Act, removing current multi-step provisions.
- Simplify the Environmental Protection Regulations by eliminating repetitive stages.
- Enhance efficiency and effectiveness of revenue administration.
- Update non-tax revenue rates and maximize government income from royalties, fees, disinvestments, and dividends.
- Convert public institutions into public limited companies, sell shares to the public, and mobilize capital through bond issuance.
- No loans for salaries or expenses in public institutions.
- Exempt individuals below a minimum income threshold from paying health insurance premiums; those above must pay both premiums and social security tax.
- Implement an effective referral system from local to provincial to federal hospitals, with updated procedures.
- Adjust wage rates based on inflation.
- Make public service delivery efficient and technology-friendly.
- Strengthen the Department of Cooperatives' unified data management for all cooperatives nationwide.
- Build local governments’ capacity to regulate and supervise cooperatives.
- Equip the Problematic Cooperatives Resolution Committee with sufficient human resources to resolve issues.
- Ban cooperatives from allowing companies or organized bodies as members—only natural persons will be allowed.
- Introduce legal limits on single-loan exposure in savings and credit cooperatives.
- Prohibit land purchases for resale by cooperatives unless for housing loans to members without homes (up to 1,000 sq. meters).
- Cooperatives cannot invest more than 25% of total credit in a single objective or area; a credit-to-deposit ratio limit will also be enforced.
- Register climate funds under the Specialized Investment Fund (SIF) Regulations, 2018, and establish legal provisions to operate them.
- Issue a Limited Liability Partnership (LLP) Act to allow registration of LLPs.
- Improve pricing policy to prevent unhealthy competition, protect consumer rights, eliminate price discrimination, and define essential goods pricing standards.
- Eliminate the requirement for business renewal.
- Allow Nepali citizens and entities to invest abroad with new laws and defined limits, approvals, and repatriation rules.
- Introduce a remote work policy (include in labor law, online registration, tax rules for foreign employers, etc.).
- Launch a digital nomad policy (visa, bank accounts, taxes, driving licenses, etc.).
- Ensure that at least 60% of credit flows into productive sectors.
- Enable issuance of long-term debt instruments for productive industries and large infrastructure projects through legal provisions.
- Set import licensing and quality standards for agricultural, plant-based, and animal products.
- Allow agricultural imports only through major customs points with laboratories.
- Enforce the Land Revenue Act to require licenses for real estate business operations.
- Do not start new road projects until current ones are completed.
- Review criteria for national pride projects.
- Completely ban land fragmentation below a minimum plot size; allow lower-level division for inherited property without physical fragmentation.
- Regulate uncontrolled real estate prices and transactions—allow only registered agents to conduct professional real estate transactions.
- Implement a national policy and guidelines for cooperative housing to facilitate access to housing for the middle class.
- Amend the 2011 National Housing Policy to clearly define roles of federal, provincial, and local governments in addressing homelessness and landlessness.
- Allow foreign investors who invest or deposit over $200,000 in Nepal under certain conditions to buy homes or flats for residential purposes.
- Draft a new National Building Policy and amend the Building Act to accommodate traditional architecture and modern technology.
- Revise urban planning standards to ensure multi-use of open urban spaces.
- Issue building permits only according to urban development plans.