Abstract
With funding from the United Nations Capital Development Fund (UNCDF), the Local Bodies
Fiscal Commission (LBFC) launched this study to shed light on the state of fiscal
decentralization as originally intended under the Nepal Local Self Governance Act,
identify lessons learned and suggest opportunities for ensuring successful fiscal
decentralization policies and transition measures to the governance structures anticipated
under the new constitution. This study highlights the extent to which the local bodies
are exercising the fiscal decentralization provisions provided under the LSGA and
identifies key recommendations needed to facilitate the effective transition with
regards to fiscal decentralization from the current unitary government structure to
the expected devolved federal government structure under the new constitution. The
study lays the foundation for further detailed work on the functional analysis of
sub-national expenditure and revenue responsibilities which will be closely aligned
with the work undertaken by the Administrative Restructuring Commission (ARC).
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