The government is preparing to establish a financial fund of Rs 100 billion for infrastructure development. With a proposal for a Rs 100 billion capital fund and a paid-up capital of Rs 25 billion, the government is set to introduce the Alternative Development Finance Mobilization Bill.

According to the provisions in the bill registered by the Ministry of Finance (MoF) in Parliament, the government proposes to invest 51 percent of the shares in the fund. Finance Minister Bishnu Paudel states that the fund is being established to ensure the necessary resource mobilization for the overall economic prosperity and development of the country, focusing on the development of high-return sustainable infrastructure and other sectors.

As per the proposed law, the government of Nepal will hold 51 percent ownership in the fund. Various funds including those with Employee Provident Fund, Citizen Investment Fund, and Social Security Fund are proposed to hold a 25 percent share. Similarly, life insurance companies, non-life insurance companies, and reinsurance companies will receive 24 percent of the shares.

The MoF has stated that it is preparing to introduce the Alternative Development Finance Law, which will include the identification and prioritization of projects, mobilization of necessary internal resources, and the appropriate use of financial instruments such as domestic and foreign investments.

The government has sought to promote the Alternative Development Finance Mobilization Fund as an autonomous institution. The government's plan is to utilize innovative sources of development to promote employment, ensure sustainable economic growth, and secure long-term investments through this fund.’

It is believed that this will help attract the private sector to public infrastructure development. To address the current shortage of financial resources, the bill has been presented in parliament to mobilize resources for national priority projects, managing resources for the country's overall economic development through the issuance of bonds, equity funds, and other financial instruments, thereby operating alternative development finance.

Various studies on the need and potential for investment in Nepal have shown that over the next decade, more than Rs 10 trillion of investment will be required. Currently, only Rs 200 to Rs 300 billion are being invested annually in infrastructure in Nepal, highlighting the need for additional investment.

The government has set a long-term national goal of producing 40,000 megawatts of electricity under the sixteenth plan. To achieve this goal, the electricity production, transmission, and distribution systems will need to be upgraded and expanded. Significant investment is also required in areas such as the industrial sector, special economic zones, smart cities, urban development, tourism development plans, roads, irrigation, drinking water, and airport construction.

The government plans to utilize sources of alternative development finance to promote employment, ensure sustainable economic development, and secure long-term investments in infrastructure projects. The concept of the financial fund has been advanced to raise funds for development by issuing financial instruments or bonds for a specific project, or by raising money from investors or the general public through equity, debt, or hybrid financial instruments.

The alternative finance fund plans to invest in energy and electricity development, transmission lines, road construction and expansion, railways, tunnel routes, airports, special economic zones, industrial parks, and the construction and expansion of dry ports.

Similarly, the fund is being established with the intention of investing in potential projects identified by the committee, including the establishment and operation of information technology parks, special tourism infrastructure, sports infrastructure, urban infrastructure, public digital infrastructure, cable cars, pod systems, and other projects expected to yield high economic returns.

Similarly, a fund is being established in preparation for investment in information technology parks, special tourism infrastructure, sports infrastructure, urban infrastructure, establishment and operation of public digital infrastructure, construction of cable cars, podways, and other potential projects that have been decided by the committee to provide high economic returns.

The objective of the fund is to raise loans for a specific project or plan by securing a guarantee from the government, an international financial institution, or any implementing agency or body, or by using the fund's own guarantee to carry out such projects. According to the provisions in the bill, a guarantee fund can be established to obtain loans or bonds, or both, from the general public or financial institutions, with a full or partial guarantee from the government or an international financial institution.

A remittance fund will be established with the investment of Nepali citizens working abroad or Non-Resident Nepalis (NRNs). Additionally, by monetizing the assets of any body or project and investing in various established funds for infrastructure projects, an integrated fund will be set up to advance development plans.

The fund that the government is planning to establish aims to make financial investments in infrastructure projects that can contribute to the country's economic development, promote employment, and yield high economic returns. It also aims to issue bonds by securing guarantees from the federal government, provincial governments, local bodies, or any organized institution or project.

The fund will obtain loans or grants from international financial institutions, foreign banks, or financial institutions, raise debt or equity by issuing bonds or mixed financial instruments in the domestic or foreign capital markets. The bonds or debentures issued by the fund will be listed in the domestic or foreign capital markets, and can be bought and sold in the securities market, or used for operating debt, equity, or both in projects.

By Dilip Paudel