NEPAL - Social Protection - Open Knowledge Repository

Social Protection:Review of Public Expenditure and Assessment of Social Assistance Programs

NEPAL

MAIN REPORTFY11–FY20

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Social Protection:Review of Public Expenditure and Assessment of Social Assistance Programs

NEPAL

MAIN REPORTFY11–FY20

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SOCIAL PROTECTION: REVIEW OF PUBLIC EXPENDITURE AND ASSESSMENT OF SOCIAL ASSISTANCE PROGRAMS

Table of Contents

Acknowledgments vii

Acronyms viii

Chapter 1. Introduction 11.1 Social Protection in Federal Nepal 1

1.2 Objective and Scope of the Report 2

1.3 Data Sources, Methodology, and Limitations 3

Chapter 2. Assessment of Social Protection Programs and Trends in Expenditures 72.1 Analysis of Trends and Levels of Budget and Expenditure 7

2.1.1 Overall Expenditure 8

2.1.2 Social insurance 9

2.1.3 Social Assistance 11

2.1.4 Labor Market Programs 15

2.2 Ability of Social Assistance Programs to Address Risks and Vulnerabilities 16

2.2.1 Poverty 16

2.2.2 Shocks and Disasters 20

2.2.3 Vulnerabilities across the Life Cycle 21

2.3 Adequacy of Benefits and impacts of Selected Social Assistance Schemes 24

2.3.1 Social Security Allowances 24

2.3.2 Scholarships 25

2.3.3 Midday Meals 26

2.3.4 Safe Motherhood Program 27

2.3.5 Prime Minister’s Employment Program 27

2.4 Policy Coherence, Coordination, and Complementarity of interventions 27

2.4.1 Policy Clarity and Coherence 27

2.4.2 Coordinating interventions and Ensuring Transitions across Programs 28

2.5 Analysis of Fiscal implications of Social Assistance Reforms 31

2.6 Summary of Findings and Recommendations 34

2.6.1 Recommendations 36

Chapter 3. Social Protection Decentralization: Analysis of Functions, Allocations, and Expenditures 393.1 Social Protection in Federal Nepal: Legal and institutional Provisions 39

3.1.1 Constitutional Provisions on Allocation of Functions 39

3.1.2 Legal and institutional Arrangements for Delivery of Programs 41

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3.2 Allocation of Social Protection Program Budget 46

3.2.1 Overall Allocation between Levels of Government 46

3.2.2 Equity in the Allocation of Budget for Key Social Assistance Programs 48

3.2.3 Efficiency Perspectives in Program Budget Allocation 51

3.3 Social Protection Expenditure at the Local Level 52

3.3.1 Overall Expenditure at Local Levels 53

3.3.2 Local-Level Expenditures on Social Protection 54


Chapter 4. Planning and Budgeting for Social Protection - Analysis of Processes and Challenges 614.1 Processes at the Federal Level 61

4.1.1 Planning and Budgeting 61

4.1.2 Fund Flow 63

4.1.3 Monitoring and Reporting 63

4.2 Processes at the Provincial Level 63


4.2.2 Fund Flow and implementation 64


4.3 Processes at the Local Level 65


4.3.2 Fund Flow and implementation 68



Annexes 79Annex 1. List of Social Protection Programs 79

Annex 2. Assumptions Used in Projections 85

Annex 3. Framework and indicators for Estimating intergovernmental Transfers 88

Annex 4. FY19 per Capita Program Budget by Poverty incidence 90

Annex 5. School Scholarship Program and Midday Meal Program per Capita Budget for FY19 by Education indicators 92

Annex 6. Safe Motherhood Program per Capita Budget for FY19 by Health indicators 94

Annex 7. OLS Estimates of Determinants of per Capita Program Budget by Local Levels 96

Annex 8. Share of Social Protection in Total, Earmarked, and Discretionary Expenditures at Local Levels, FY19 98

Annex 9. Budgeting Processes and Timelines at Federal and Local Levels 100

Annex 10. Fund Flow of Key Programs before and after Federal Restructuring 101

Annex 11. institutional Arrangement for the Delivery of SP Programs at the Local Level 102

Bibliography 103

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List of FiguresFigure 1: Three Estimates of SP Expenditure 4

Figure 2: SP Expenditures (Nominal, NPR, billions) 7

Figure 3: SP Expenditure as a Share of GDP 8

Figure 4: SP Expenditure by Category, FY19 8

Figure 5: Distribution of Pensioners across Quintiles and by Gender and Location (NLFS iii) 10

Figure 6: SSA Beneficiaries over the Last 10 Years 11

Figure 7: Nominal and Real SSA Expenditure over the Last 10 Years 12

Figure 8: Evolution of Key Social Assistance Program Expenditures (Nominal and as Share of GDP) 13

Figure 9: Social Assistance Expenditure, as a Share of GDP 14

Figure 10: Budget Execution Rates 15

Figure 11: Consumption Poverty (2011) and Multidimensional Poverty (2014) 17

Figure 12: Coverage of Social Assistance by Asset Quintile 18

Figure 13: Percentage of Rural Households Receiving Benefits, across Quintiles 18

Figure 14: SP Programs across the Life Cycle 20

Figure 15: Total and Per Beneficiary Social Assistance Expenditure by Life Cycle in FY19 21

Figure 16: Coverage of SSA among Eligible individuals 22

Figure 17: Evolution of SSA Monthly Benefits over the Years (Nominal) 25

Figure 18 Projected Social Assistance Spending under Different Scenarios 33

Figure 19: Cost of SSAs under Various Scenarios, FY20 34

Figure 20: Typology for Division of Roles and Responsibilities in Social Protection 43

Figure 21: Total Budget Allocation and intergovernmental Transfers from the Federal Level 46

Figure 22: Decentralization of Federal Budget in Human Development Sectors 47

Figure 23: Distribution of Population across Areas and Poverty Headcount Ratios (HCRs) 48

Figure 24: Population and Poverty HCRs of Local Levels 49

Figure 25: Per Capita FY19 Program Budget for Three Federally Financed Programs 49

Figure 26: Per Capita FY19 SSA Budget by Geography 50

Figure 27: Changes in Education indicators by Receipt of Midday Meal Program (FY18–FY19) 52

Figure 28: Overall Local-Level Expenditure by Source 53

Figure 29: Local-Level Expenditures by Function 54

Figure 30: SP Expenditure Disaggregation by Source FY18 and FY19 55

Figure 31: Share of Human Development Sectors in Earmarked and Discretionary Local-Level Expenditures, FY19 56

Figure 32: Locations of Local Levels Visited by the Field Research Team 61

Figure 33: Local-Level Planning Process 66

Figure 34: intergovernmental Fund Flow Mechanisms 70

Figure 35: Fund Flow to Service Delivery Facilities 73

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List of BoxesBox 1: issues in Estimating SP Expenditures 3

Box 2: COViD-19 and SP in Nepal 5

Box 3: Potential Role of Social Registry in Nepal to improve Coordination across Programs 29

Box 4: Cash Transfer Programs as Mechanisms to Promote investment in Human Capital 30

Box 5: Delivering Social Protection in Federal Contexts - Lessons from international Experience 43

Box 6: Limited Analysis Can Result in Unsustainable Programming 69

Box 7: Excerpts from ‘Nepal: Capacity Needs Assessment for the Transition to Federalism’ Report 71

Box 8: Progress in Payment Systems 72

List of TablesTable 1: SP-Related Provisions in the Constitution of Nepal 1

Table 2: Key Social Assistance Programs 12

Table 3: Scenarios, Assumptions, and impacts of Simulated Projections 32

Table 4: Social Protection Related Excerpts from the Unbundling Report 40

Table 5: Social Protection Federal Budget Allocation (to All Levels, Functional Classification) 47

Table 6: Correlation between per Capita Program Budget and Poverty HCR 51

Table 7: Link between the Social Protection Budget and Health and Education Outcomes 52

Table 8: Summary of Local-Level Transfers and Expenditures by Source FY19 54

Table 9: Additional Programs for Social Protection at Selected Local Levels 67

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This report was prepared by Jyoti Pandey, Soyesh Lakhey, and

Aline Coudouel, under the direction of Stefano Paternostro

(Practice Manager), Lynne Sherburne-Benz (Regional

Director), and Faris Hadad-Zervos (Country Director).

Within the World Bank, the team is grateful to members of the

Social Protection and Jobs team, namely Anastasiya Denisova,

Phillippe Leite, and Jasmine Rajbhandary; members of the

Macro and Fiscal team, namely Florian Blum, Kene Ezemenari,

Leif Jensen, Nayan Krishna Joshi, and Tae Hyun Lee; and

Deb Narayan Mahato, Ram Krishna Rijal, Anupama Shakya,

Fahmina Rahman Dutta, Rakesh Ayer, and Tara Shrestha for

their assistance.

Acknowledgments

The team also wants to thank Government officials and

development partners, in particular colleagues from UNiCEF,

FCDO, UNHCR, UN Women, and Oxfam who provided

comments on an early draft of the report.

The analysis draws in part on a background note on

‘Delivering Social Protection in Federal Nepal’ prepared by

Tracy Fenwick and Soyesh Lakhey and a background report

‘Human Development Expenditure: A Qualitative Assessment

of Local Level Processes’ prepared by Gyanu Sharma, Mamata

Pokharel, Mahima Poudel, and Roshan Sedhain.

The team gratefully acknowledges financial support from

FCDO-UK.

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4Ps Pantawid Pamilyang Pilipino Program

AHS Annual Household Survey

AUH Asignación Universal por Hijo

BISP Benazir income Support Program

BL Basic Level

CCT Conditional Cash Transfer

CFT Child and Family Tracker Survey

DHS Demographic Health Survey

DOHS Department of Health Services

DONIDCR Department of National iD and Civil Registration

DTCO District Treasury Comptroller Officer

ECD Early Childhood Development

ECED Early Childhood Education and Development

ELAM informal Sector Enterprise Development and

Employment Generation Program

EMIS Education Management information System

ENSSURE Enhanced Skills for Sustainable and Rewarding

Employment

ESC Employment Service Center

EVENT Enhanced Vocational Education and Training

FBA Formula-Based Amount

FCGO Financial Comptroller General Office

FDS Family Development Sessions

FEG Fiscal Equalization Grant

FIARCC Federalism implementation and Administration

Restructuring Coordination Committee

FWLD Forum for Women, Law and Development

G2P Government-to-People

GDP Gross Domestic Product

GPI Gender Parity index

HCR Headcount Ratio

HMIS Health Management information System

HRVS Household Risk and Vulnerability Survey

IFA iron and Folic Acid

IGD index of Decentralized Management

IGFA Act intergovernmental Fiscal Arrangements Act

ILO international Labour Organization

IT information Technology

KEP Karnali Employment Program

LL Local Level

MA Minimum Amount

MCHN Maternal and Child Health and Nutrition

MEDEP Microenterprise Development Program

MEDPA Microenterprise Development and Poverty

Alleviation

MICS Multiple indicator Cluster Survey

MIS Management information System

MOEST Ministry of Education, Science and Technology

MOF Ministry of Finance

MOHA Ministry of Home Affairs

MOHP Ministry of Health and Population

MOLESS Ministry of Labor, Employment and Social

Security

MOLCPA Ministry of Land Reform, Cooperatives and Pov-

erty Alleviation

MOUD Ministry of Urban Development

MOWCSC Ministry of Women, Children and Senior Citizens

MPI Multidimensional Poverty index

MTEF Medium Term Expenditure Framework

NDHS National Demographic Health Survey

NER Net Enrolment Rate

NGO Nongovernmental Organization

NLFS National Labor Force Survey

NLSS National Living Standards Survey

Acronyms

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NNRFC National Natural Resources and Fiscal Commission

NPC National Planning Commission

NSDS Nutrition Sensitive Direct Support

OJT On-the-Job Training

OPM Oxford Policy Management

OVC Orphans and Vulnerable Children

PAF Poverty Alleviation Fund

PBA Performance-Based Amount

PF Programa Familias

PFM Public Financial Management

PJJHD Jefes and Jefas

PL Primary Level

PMEP Prime Minister's Employment Program

PMT Proxy Means Testing

PNBSF Programme National de Bourses de Sécurité

Familiale

PSSN Productive Social Safety Net

PTCO Province Treasury and Controller Office

RCIW Rural Community infrastructure and Works

SDIP Safe Delivery incentive Program

SMEs Small and Medium Enterprises

SP Social Protection

SSA Social Security Allowance

SSAEP Social Security Allowance for the Economically

Poor

SSDP School Sector Development Project

SSF Social Security Fund

SUAS Unified System of Social Assistance

SuTRA Subnational Treasury Regulatory Application

UN United Nations

UNESCO United Nations Educational, Scientific and Cultural

Organization

UNICEF United Nations Children’s Fund

VAW Violence against Women

VUP Vision 2020 Umurenge Program

WASH Water, Sanitation, and Hygiene

WFP World Food Programme

YETI Youth Employment Transformation initiative

YSEF Youth and Small Entrepreneur Self-Employment

Fund

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1 For a summary overview of the report, please refer to World Bank 2021. “Social Protection: Review of Public Expenditure and Assessment of Social Assistance Programs: Overview.”

1.1 Social Protection in Federal NepalNepal’s recent transition to a federal state structure

provides a historic juncture to realize the role that social

protection can play in achieving the constitutional

goals of equity, inclusion, and prosperity. The history of

government investment in social protection in Nepal goes

back to the mid twentieth century, with current expenditure

levels being above that of its neighboring countries and

those at similar levels of development. The transition to a

federal structure of governance and the promulgation of

a new Constitution founded on the principles of equity,

inclusion, and prosperity for all have brought about

tremendous expectations for the previously marginalized

and discriminated poor and vulnerable segments of the

population. Social protection (SP) programs, which have

been proven to contribute to poverty reduction and inclusive

growth, have the potential to play a significant role in meeting

these expectations and realizing the objectives of federalism.

Introduction1 CHAPTER 1.

Article Rights Description

31 Right to educationEvery citizen shall have the right to get compulsory and free education up to the basic level and free education up to the secondary level from the State.

33 Right to employment Every citizen shall have the right to employment.

34 Rights to labor Every laborer shall have the right to appropriate remuneration, facilities, and contributory social security.

35 Right related to healthEvery citizen shall have the right to free basic health services from the State, and no one shall be deprived of emergency health services.

36 Right related to food Every citizen shall have the right to food sovereignty in accordance with law.

38 Rights of womenEvery woman shall have the right to safe motherhood and reproductive health. Women shall have the right to obtain special opportunity in education, health, employment, and social security, on the basis of positive discrimination.

39 Rights of childrenEvery child shall have the right to name and birth registration along with his or her identity.A child who is helpless, orphan, with disabilities, conflict victim, displaced, or vulnerable shall have the right to special protection and facilities from the State.

40 Right of Dalits Special provision shall be made by law to provide health and social security to the Dalit community.

41 Rights of senior citizens The senior citizens shall have the right to special protection and social security from the State.

42 Rights to social justiceThe indigent citizens and citizens of endangered ethnicities shall have the right to get special op-portunities and benefits in education, health, housing, employment, food, and social security for their protection, upliftment, empowerment, and development.

43 Right to social securityCitizens who are economically poor, infirm and helpless, helpless single women, with disabilities, children, unable to take care of themselves, and belonging to endangered ethnicities shall have the right to social security, in accordance with law.

Table 1: SP-Related Provisions in the Constitution of Nepal

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Nepal has a robust constitutional and legal basis for

social protection. The rights to social security, employment,

education, health, food, and housing are fundamental rights

enshrined in the Constitution. The Constitution also provides

for other fundamental rights reserved for Dalits, women,

children, and senior citizens. Social justice is included as both a

fundamental right (Article 42) and a guiding principle of state

governance (Article 50). The economically poor, incapacitated

and helpless, single women, people with disabilities,

endangered ethnicities, children, and those who cannot take

care of themselves have the Right to Social Security (Article

43). Social protection and inclusion-related policies are to

prioritize targeting of the economically poor among members

of all genders, communities, and regions (Article 51.j.12). The

inclusion of these rights provides a legal and constitutional

basis and mandate to require all SP programs to ensure that no

eligible citizens are excluded from exercising their fundamental

rights to those services. Table 1 provides a list of SP-related

rights included in the Constitution.

The transition from a unitary to a federal structure of

governance brings challenges as well as opportunities to

ensure that investments in social protection are leveraged

for the effective realization of these fundamental rights.

Nepal’s social protection sector has been characterized by

a fragmented program landscape, with limited institutional

capacity to coordinate across various interventions. The

transition to federal state was accompanied by continuation

of legacy programs and delivery systems developed during

the unitary structure of governance. The somewhat slow

progress in building capacity of subnational levels and

continuing lack of clarity on the roles of different levels of

government in the new federal structure further adds to

the complexities and challenges of the transition. However,

decentralization also provides a unique opportunity to

improve beneficiary identification, coverage, adequacy, and

the quality of service delivery at the subnational levels, while

also allowing for greater citizen participation in setting levels

and standards of social protection services.

1.2 Objective and Scope of the ReportThis report assesses overall social protection

expenditures, with a focus on non-contributory social

assistance programs. is Nepal’s spending in social protection

adequate? Are social assistance programs aligned with the

various sources of risks and vulnerability? Does the current

state of policy and institutional arrangement support

coordinated, efficient, and effective planning and delivery

of programs across the three level of governments? Do the

processes to allocate, transfer, and implement program

funds ensure equity, efficiency, and inclusion? What are the

constraints and bottlenecks in improving the design, delivery,

and monitoring of programs? These are some of the questions

that the various chapters in this report aim to engage with to

elicit some recommendations on the way forward.

The objectives of the report are to (a) analyze social

protection expenditure and the social assistance program

portfolio in Nepal and formulate recommendations for

greater impact and efficiency; (b) assess the decentralization

of functions and funds as they relate to delivery of social

assistance in the federal context, with a focus on both

the allocation and expenditure figures and the processes

followed at each level of government; and (c) provide

recommendations on the policy, institutional, programmatic,

and procedural changes necessary to improve the efficiency

and effectiveness of expenditures in Nepal, with a particular

focus on social assistance.2

Definition. Social protection is defined in this report as the set

of programs and systems that help individuals and households,

especially the poor and vulnerable, reduce poverty, cope with

crises and shocks, find jobs, improve productivity, and invest

in health and education of their members. it is defined here to

cover the following range of programs:

n Social insurance. Typically includes contributory

programs such as public sector pensions, unemployment

insurance, and health insurance. Public sector pension is

2 After a review of overall SP spending, this report focuses on social assistance programs.

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Box 1: issues in Estimating Social Protection Expenditures

According to the economic classification of the Government of Nepal, Social Security (coded 27000 in the Red Book) includes social security transfers to senior citizens, single women, and so on (coded 27100); scholarships (coded 27200); and pensions and other benefits to government staff (coded 27300). The expenditure economically classified as social security in FY19 was about NPR 117 billion, and allocation for FY20 was NPR 157 billion. This classification, however, excludes some social assistance programs like the Prime Minister’s Employment Program (PMEP) and Rural Community infrastructure and Works (RCiW) and midday meals; insurance programs like the health insurance program; and labor market programs like the Youth and Small Entrepreneur Self-Employment Fund (YSEF).

The functional classification of Social Protection which includes expenditures on the infirm and ill, senior citizens, those in the custody of the state, family and child welfare, unemployed, social non-

inclusive, SP - research and development, and SP - unclassified, counts a much smaller portion of the expenditure. The expenditure functionally classified as SP in FY19 was NPR 47 billion, and allocation for FY20 was NPR 71.4 billion.

in this report, when adopting a broader definition of Social Protection including all social insurance, social assistance, and labor market programs, FY19 expenditure is estimated to be NPR 134 billion. Besides cash transfers, social assistance includes noncontributory programs such public works and school meal programs which are not coded as social security. This broader definition also includes labor market programs such as Enhanced Vocational Education and Training (EVENT) and YSEF which support skill training and employment support. The table below compares the list of key programs classified as Social Security according to the economic classification to list of programs according to the broader definition. Figure 1 presents total expenditure for each classification.

included here although it has been noncontributory in

Nepal until two years ago.

n Social assistance. Noncontributory programs, such as

cash transfers, scholarships, health subsidies, and school

feeding, include care services.

n Labor market programs. Skills training, economic

inclusion, entrepreneurship, job-search, and employment

support programs.

This differs from the economic and functional classifications

as used in the government budget, both of which exclude

certain programs that are generally considered as social

protection. Box 1 presents the different definitions of social

protection according to these classifications.

Private vs public expenditures. The analysis conducted

as part of this study only looked at public sources of funds

for expenditures in social protection defined above. Hence,

private contributions to the Social Security Fund (SSF) or Health

insurance Program or private sector provision of labor market-

related programs like skills training, business support services,

and so on are not included as part of the analysis in the report.

1.3 Data Sources, Methodology, and LimitationsThe report uses a mix of quantitative and qualitative data

over the past 10 years. The analysis presented in the report

focuses on the period covering FY11 to FY20 (only allocation

data for FY20) for national expenditure and FY18 and FY19

for local-level allocations and expenditures. The analysis is

anchored in secondary data from various sources including

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Source: Red book, Ministry of Finance, Various years

program administrative data, red books, expenditure data

from consolidated financial reports, surveys from various years

(including Annual Household Surveys [AHSs], National Living

Standards Survey [NLSS], National Labor Force Survey [NLFS],

and so on), and macroeconomic projections prepared by World

Bank staff. in addition, primary data were collected specifically

for this report, from field visits to 10 local levels across the seven

provinces, used primarily to inform the findings of chapter 4.

Figure 1: Three Estimates of Social Protection expenditure

Programs included in this report’s esti-mates and classified as Social Security in

the economic classification

Programs included in this report’s estimates but not classified as Social

Security in the economic classification

Programs classified as Social Security in the economic classification but not

included in this report’s estimates

Social Security Allowances (SSAs)Public works programs:

� PMEP � RCiW

Expenditures under Jail Offices, immigra-tion Office, and District Administration Offices

Scholarships to students Midday mealsScholarships provided to government staff across various agencies

Social Welfare Centers (under Ministry of Women, Children and Senior Citizens [MOWCSC])

Social Welfare Program (under MOWCSC)

Leprosy Control Public food distribution system

Safe Motherhood Program National Health insurance

EVENT YSEF

Public sector pensions SSF

Retirement gratuity, accumulated leave, and medical facility

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Box 2: COViD-19 and Social Protection in Nepal

Measures to contain the spread of COViD-19 including lockdowns, travel restrictions, and border closures have adversely affected significant groups of Nepal’s population. in addition, remittance earnings have declined sharply. The poor and vulnerable, particularly the nearly 8 million people in subsistence agriculture and 5.9 million people who work in informal sectors, are the hardest hit (NLFS 2017/18). According to the estimates of the international Labour Organization (iLO) from May 2020, between 1.6 million and 2.0 million jobs are likely to be disrupted in Nepal, either with complete job loss or reduced working hours and wages (excluding the impact on the subsistence farmers). There are nearly 3.7 million workers earning their livelihoods in the sectors deemed most at risk to experience a significant (medium to high) reduction in economic output as a result of the COViD-19 crisis. Large numbers of people will slide into poverty.

SP measures are critical to mitigate the pandemic’s impact by compensating people for loss of income, promoting employment retention, and helping small businesses and the self-employed recover from the crisis. However, SP programs and systems have not been mobilized at scale to respond to the crisis. The Government of Nepal has responded with food assistance and scaled up cash-for-work program, although delayed in many parts of the country. The government has not introduced a cash response.

This analysis focuses on pre-COViD-19 expenditures and does not directly address or reflect the impact of COViD-19. However, the analysis exposes the underlying structural issues in the policy, design, and delivery of social protection that limit the mobilization of programs and systems toward shock response in a crisis such as COViD-19. The recommendations are geared toward strengthening the system for building resilience and readiness for response in the medium term.

Availability and quality of data, as well as the small

sample size of the primary data collection, limited some of

the analysis presented. Lack of disaggregated program-level

allocation and expenditure data constrained the analysis of

trends before and after the transition to federal structure. The

quality of expenditure data and the level of disaggregation

available also limit the analysis, particularly in chapter

3. The small sample size for the field visit also precludes

generalizations from their analysis presented, particularly in

chapter 4.

The report is structured as follows, with each chapter concluding

with a set of recommendations based on the analysis.

n Chapter 2. Provides an overall analysis of social

protection expenditure trends, an assessment of ability

of social assistance programs to address various sources

of risks and vulnerability, an analysis of fiscal implications

of reforms based on simulations and projections, and

a discussion of policy and procedural challenges to

improve coordination and coherence in program design

and delivery.

n Chapter 3. Assesses the policy and institutional

framework for design and delivery of social protection

programs in the decentralized federal context and

analyzes the trends in distribution of budget allocations

of main social assistance programs and expenditures at

the local level from equity and efficiency perspectives.

n Chapter 4. Provides an overview of planning, budgeting,

fund flow, and reporting processes for social protection

programs at federal, province, and local levels and

analyzes the challenges and bottlenecks in the processes

as related to institution, systems, and capacities.

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Figure 2: Social Protection Expenditures (Nominal, NPR, billions)

Source: Red Book, Ministry of Finance (MOF), various years.

This chapter aims to provide an overview of expenditure

trends in social protection in Nepal (including social

insurance, social assistance, and labor market programs as

defined in Chapter 1) over the past decade and an assessment

of the design, coverage, and adequacy of the existing social

assistance program portfolio in addressing various sources of

risks and vulnerabilities. The chapter also reviews the policy

and procedural changes which could improve coordination

and coherence in the design and delivery of programs. The

chapter then presents the results from simulations made

to understand whether there is sufficient fiscal space in

the medium term to improve the coverage of the poor and

vulnerable. Finally, the chapter concludes with selected

recommendations.

2.1 Analysis of Trends and Levels of Budget and ExpenditureThe Government of Nepal implements a set of social protection

programs, including public sector pensions, cash and in-kind

transfers, scholarships, health benefits, and labor market

programs. The introduction of the senior citizen allowance

of NPR 100 per month to all citizens over the age of 75 in

1995 marked the beginning of large-scale social protection

programming in Nepal, although scholarships have been in

Assessment of Social Protection Programs and Trends in Expenditures

CHAPTER 2.

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Figure 3: Social Protection Expenditure as a Share of GDP

Source: Red Book, MOF, various years.

existence since the early 1970s and old-age homes have existed

since the 1880s. Social protection programs have evolved

and expanded over the years, with a marked increase with

the ushering in of a new post-conflict government in 2008.

Programs have mainly focused on addressing vulnerability

associated with life cycle and social risks, rather than economic

poverty. A full list of programs with basic description, coverage,

and FY19 expenditure is in annex 1.

2.1.1 Overall ExpenditureThe Government of Nepal spends a substantial and

increasing amount on SP. Expenditure on SP has continued

to expand both in nominal terms and as a share of GDP over

the last decade, reaching nearly 3.5 percent of gross domestic

product (GDP) in FY19 from about 1.9 percent in FY10 (Figure

2 and Figure 3).3 Nominal SP expenditure has grown fivefold

over the last 10 years, reaching NPR 134.4 billion in FY19 or

11 percent of total government expenditure.4 The allocation

for FY20 was NPR 189 billion, an estimated 4.8 percent of GDP.

Assuming FY11 as the base year, real expenditure has also

increased by over three times over the subsequent 10 years.

The increase in national SP expenditure since FY17 has been

Figure 4: Social Protection Expenditure by Category, FY19

Source: Red Book, Ministry of Finance, 2020

mainly due to an increase in the size of SSA benefits and an

increase in the benefits provided as public pensions.

In terms of composition, social insurance continues to

constitute the largest share of spending, accounting for about

3 All GDP figures used are nominal.4 Excludes Government contributions to the civil servants’ Employee Provident Fund which are presented as part of the wage bill in the Red Book. Including these

contributions would increase total SP expenditure to NPR 146 billion, 4.2 percent of GDP.

9


5 Household Risk and Vulnerability Survey (HRVS). 6 Employees with 5–10 years of service are paid one-half of their last monthly salary for each year of service; those with 10–15 years of service are paid one time their

monthly salary for each year of service; and those with 15–20 years of service are paid one-and-a-half times their last monthly salary for each year of service.7 Estimate from NLFS III.

56 percent of the total SP expenditure in FY19 (Figure 4). Social

assistance constituted 41 percent of the expenditure in the same

year. Labor market spending remained low, accounting for only 3

percent of the total SP expenditures in FY19.

Altogether, social protection programs serve over 10.5

million beneficiaries. Social insurance programs cover over

3.7 million beneficiaries (including 250,000 individuals under

the public sector pensions and 2.7 million individuals under

the health insurance scheme). Social assistance programs cover

over 6.8 million individuals, and labor market programs cover

about 0.2 million individuals. Some individuals or households

could be benefiting from multiple programs when they present

multiple vulnerabilities, although evidence suggests this is rare

across social assistance programs.5 in total, programs directly

serve over 10.5 million individuals. This represents about one-

third of Nepal’s population. The Government of Nepal’s 15th

five-year plan aims at increasing government spending on

social protection to 13.5 percent of the budget and covering 60

percent of the population by the end of FY25 (including both

social assistance and social insurance programs).

2.1.2 Social InsuranceSocial insurance, mainly comprising public sector

pensions, accounted for about 56 percent of total SP

expenditure or 2 percent of GDP in FY19. Total social

insurance expenditure in FY19 was NPR 75.4 billion,

excluding the Government’s contributions as the employer

for civil servants to the Employee Provident Fund (typically

considered part of the wage bill). including the Government’s

contributions to the Employee Provident Fund (NPR

11.7 billion) would increase the share of social insurance

expenditure in total SP expenditure to 60 percent.

Pensions are paid to former government employees, the

army, the police, and teachers, covering over 250,000

individuals. Pensions consist of defined benefit pension

and gratuity paid based on the number of years in service.

individuals must serve a minimum of 20 years to be eligible

for pensions, and the mandatory retirement age is 58

years. Civil servants with a minimum of five years of service

are also entitled to a gratuity.6 They also receive benefits

for accumulated leave and medical facility. Government

employees who are not civil servants, such as those working

in various boards and special programs, also receive gratuity

and other benefits.

Public pension expenditure has seen a few dramatic

spikes over the last decade. The first was in FY09 when

pension expenditure more than doubled from NPR 5.7 billion

to 13.7 billion. This was primarily driven by the Government’s

decision to implement a voluntary retirement scheme with

financial incentives (a Golden Handshake) for civil servants.

About 5,500 individuals retired in 2009 and received a lump

sum equal to 7 years of pension, costing the treasury over

0.5 percent of GDP. Pension expenditures then declined for

a few years. The subsequent large increases resulted from

civil service salary increases, with an increase in the basic pay

scale by 18 percent in FY14 (Budget Speech, July 14, 2013)

and by 25 percent in FY17 (Budget Speech, May 28, 2016).

As pensions are pegged to salaries, this led to an increase

in pension expenditure by nearly NPR 5 billion in FY14 and

over NPR 9 billion in FY17. The pegging means that pension

expenditure can be expected to increase when salaries are

adjusted to reflect inflation.

While public sector pension is the largest social protection

expenditure, it only provides benefits to about 1 percent

of the population.7 According to the Pension Management

Office, 250,089 individuals received a pension at the end

of FY19, in line with the estimated population coverage.

Pensioners are overwhelmingly urban and male and belong

to the richer quintiles (Figure 5): 68 percent of pensioners

belonged to the richest two quintiles (only 6 percent lived in

the poorest quintile), 68 percent were urban dwellers, and 76

percent were male.

10


Public sector pensions had been fully financed from

annual budget appropriations until FY19. in March 2019,

the Government approved legislation to create the Pensions

Fund which would collect contributions from employees

and the Government as the employer, applicable to all

new recruits into the civil service. Existing civil servants

will continue to be covered by previous provisions. This

should ease the fiscal burden in the long term. However, in

the medium term, the burden will increase as the budget

will have to cover both defined benefit pensions for

current retirees and recruits before 2019 as well as defined

contributions to the Pensions Fund for the new recruits.

Reviewing the retirement age could alleviate fiscal

pressures in the long run. The retirement age for civil

servants was recently increased from 58 to 60 years. With

increasing life expectancy and since many individuals remain

active in the labor market between the age of 60 and 70, the

retirement age could be further increased, in line with the age

of eligibility for senior citizen allowance currently set at 70 for

most seniors.

In FY20, the Government launched the SSF schemes

to expand the coverage of contributory pensions and

insurance schemes to all workers, beyond civil servants.8

The four schemes are (a) medical, health, and maternity

benefit; (b) accident and disability benefit; (c) dependent

family benefit; and (d) old-age benefit. The rollout of the

SSF schemes has been challenging with only 12,709 firms

with 174,704 individuals registered and NPR 87 million in

contributions collected as of September 30, 2020. While these

schemes should not burden the Government treasury by

design, the Contributory Social Security Act has provisions

which could make the Government liable to pay the matching

contribution for self-employed workers and those in the

informal sector.

Nepal also has a National Health Insurance Scheme

which is currently available to households in 51 districts

(530 local levels) across the country.9 The program is meant

to be rolled out to cover all households nationwide. As of

September 20, 2020, over 3 million individuals were enrolled

in the program according to the health insurance dashboard.

8 SSF has been collecting 1 percent of the income deducted from payroll since 2012 before these schemes were announced. 9 The health insurance program has been rolled out to 75 of the 77 districts in June 2021.

Figure 5: Distribution of Pensioners across Quintiles and by Gender and Location

Source: Authors’ estimates based on NLFS iii

11


A household with five members pays an annual premium

of NPR 3,500 for coverage of up to NPR 100,000. While the

scheme is contributory by design, the Government plans to

finance the premium for poor households and individuals

over 70 years of age. The payouts so far, at NPR 4.33 billion,

far exceed the premium collected at NPR 3.13 billion,

highlighting the potential fiscal impact of the scheme.10

2.1.3 Social AssistanceSocial assistance programs constituted about 41 percent

of the total SP expenditure and 1.4 percent of GDP in

FY19. Estimates suggest that 35.5 percent households

were covered by social assistance programs in 2018.11 The

SSA, managed by the Department of National iD and Civil

Registration (DONiDCR) under the Ministry of Home Affairs

(MOHA), is the largest social assistance program. it cost NPR

41.2 billion in FY19 and constituted around 48 percent of

the total social assistance spending. The five SSA schemes

(senior citizen allowance, single women allowance, disability

allowance, endangered ethnicity allowance, and child grant)

Source: DONiDCR.

Figure 6: SSA Beneficiaries over the Last 10 Years

cover nearly 3 million individuals and their households, with

benefits ranging from NPR 400 to NPR 3,000 a month.

The SSA program has expanded steadily over the years

to cover a larger number of people. Figure 6 and Figure 7

show the evolution of total benefits and beneficiaries. The

number of SSA beneficiaries nearly doubled in FY09 from

about half a million the year before, and the expenditure

increased almost fourfold to NPR 4.2 billion from under NPR

1 billion. This was mainly due to the lowering of the age of

eligibility for senior citizens to 60 years for Dalits and Karnali

residents and from 75 years to 70 years for other senior

citizens. By FY16, the expenditure had reached NPR 16 billion,

which more than doubled in the following year as all benefit

amounts were doubled. in FY20, the allocation increased to

NPR 64.5 billion as all benefits except the child grant were

increased by NPR 1,000. Figure 7 shows the gradual evolution

of SSA expenditure. Assuming FY11 as the base year, real

expenditure has also increased over fourfold since FY11.

10 Total public expenditure on the program in FY19 was NPR 2.7 billion (out of an allocated NPR 6 billion). So far, collected premiums have been saved in an account, and the Government budget has been used to finance payouts on claims.

11 Estimates in Walker, Kawasoe, and Shrestha (2019) from the HRVS.

12


Program DescriptionBeneficiaries

(in millions,FY19)12

Expenditure (in NPR, millions, FY19)

SSAs Cash transfers to senior citizens, single women, those with disability, endangered ethnicity, and children

3.1 (FY20) 41,150

Scholarships Scholarship to Dalits, girls, those with disability, conflict affected, martyr’s children, freed Kamalari, and other groups

3.2 2,900

Midday Meals Midday meal in schools to improve nutrition among school-going children in early childhood development (ECD) to Grade 5

1.3 2,935

Safe Motherhood Program (Aama Surakshya Karyakram)

Cash incentives to mothers to deliver at health facilities 0.43 (FY18) 1,080

Poor Citizens Medical Treatment Fund (Bipanna Nagarik Aushadhi Upachar Kosh)

Medical expenses up to NPR 100,000, for poor citizens, for treatment of specified diseases

0.02 (FY18) 1,102

PMEP Minimum employment guarantee 0.06 3,100

Table 2: Key Social Assistance Programs

12 Beneficiary figures are for FY19 unless stated otherwise. 13 The PMEP is considered a social assistance scheme in this report as the initial activities have been focused on providing cash for work and subsistence allowance to the

unemployed although it has elements of labor market programs in its scope.

Figure 7: Nominal and Real SSA Expenditure over the Last 10 Years


Other key social assistance programs include scholarships

and midday meals under the Ministry of Education, Science

and Technology (MOEST); health schemes under the Ministry

of Health and Population (MOHP); and the new PMEP under

the Ministry of Labor, Employment and Social Security

(MOLESS).13 Table 2 lists the key programs. Figure 8 shows

the evolution of key programs; the total social assistance

expenditure is shown at the top of each column.

13


Figure 8: Evolution of Key Social Assistance Program Expenditures (Nominal and as Share of GDP)

Source: Red Book, MOF, various years and program reports.Note: KEP = Karnali Employment Program.

program supported by the World Food Programme (WFP)

in FY19.16 The midday meals are costed at an average of

NPR 15 per meal per day provided each day throughout

the school year.

The Safe Motherhood Program aimed at increasing

institutional deliveries and spent over NPR 1 billion in

FY19. The allocation for FY20 is NPR 1.9 billion. The program

provides cash incentives for women to visit health facilities

for four antenatal care visits and deliver at health facilities

and for one postnatal visit. The incentive for delivery is NPR

1,000, NPR 2,000, and NPR 3,000, respectively, for Terai,

Hills, and Mountains. in addition to the cash incentive for

mothers, the program covers the reimbursement to facilities

for institutional delivery (normal, assisted, and surgical),

emergency referrals including air lifting, blood transfusion,

abortion, and free sick newborn care. According to the

Department of Health Services (DOHS) annual report, it

covered 425,000 women in FY18.

14 Details on each scheme are in annex 1. 15 Children belonging to 26 endangered and marginalized groups 16 The midday meal program was rolled out nationwide in FY21.

Scholarships and midday meal programs under the

MOEST spent NPR 5.8 billion in FY19. The scholarships

covered about 3.2 million beneficiaries in FY19. Of these,

about 2.9 million were students at the basic level and

about 0.2 million at the secondary level. A few thousand

students benefited from scholarships at the tertiary level.

According to the ministry’s Scholarships Guidelines 2074,

there are 15 types of scholarships including five residential

scholarships. The value of scholarships ranges from NPR

400 to NPR 40,000 per year.14 The scholarships are aimed at

enhancing gender equity and inclusion in access to basic

education and are mainly targeted to girls, Dalits, those

with disabilities, and the marginalized.15 New categories

were introduced post conflict to cover newly recognized

vulnerable groups and the conflict affected. The midday

meal program aimed at improving the nutritional status,

class attendance, and learning capacity and covered

over 1.3 million children in 44 districts (435 local levels),

including 11 districts under the Food for Education

14


The MOHP also manages the Poor Citizens Medical

Treatment Fund (Bipanna Nagarik Aushadhi Upachar Kosh)

which spent NPR 1.1 billion in FY19. The fund reimburses health

facilities for the treatment of poor individuals for expenses

up to NPR 100,000 for the treatment of the following severe

diseases: cardiovascular diseases, kidney failure, cancer,

Parkinson’s, Alzheimer’s, spinal and head injury, and sickle cell

anemia. Eligible individuals are either those belonging to a

household identified as poor by the Poor Household Support

Coordination Board or the poor upon recommendation of the

local-level recommendation committee.

The PMEP is a national program launched in FY19 aimed

at providing 100 days of employment or a subsistence

allowance in the absence of minimum employment to

unemployed adults. it aims to operationalize the right to

employment enshrined in the constitution. PMEP is considered

social assistance instead of a labor market program here

as it is essentially a cash-for-work program targeted to the

working poor although it has elements of a labor market

Figure 9: Social Assistance Expenditure, as a Share of GDP

Source: World Bank, ASPiRE database, State of Safety Nets 2018.

program. Expenditure in FY19 was NPR 3.1 billion while the

FY20 allocation is just over NPR 5 billion. The KEP and RCiW, the

predecessors to PMEP, have been discontinued.

Many smaller social assistance programs are scattered

across several ministries. Altogether, they amounted to NPR

2.2 billion or 4 percent of the total SP expenditure in FY19. These

include old-age homes and orphanages under the MOWCSC;

post-conflict transfers to the martyred and disappeared, now

under the MOHA; a poverty alleviation program called the Garib

Sanga Bisweshwor under the Ministry of Land Management,

Cooperatives and Poverty Alleviation (MOLCPA); People’s

Residence Program (Janata Awas Karyakram) under the Ministry

of Urban Development (MOUD); and the public food distribution

system under the Ministry of industry, Commerce and Supplies.

Nepal spends a higher share of its GDP on social

assistance than other countries in the region but at par

with global averages. Within South Asia, Nepal spends more

than the region’s average of 0.9 percent of GDP, itself the

15


17 Expenditure data are not available for many programs for FY19. For the rest of the analysis, expenditure is assumed to be equal to allocation.18 Details on each program are listed in annex 1.

lowest spending of any region in the world (Figure 9). Nepal’s

expenditure is at par with the average in lower-middle-

income countries (1.4 percent of GDP) and just below the

average for all developing countries (1.5 percent of GDP).

Budget execution rates for the large programs are

high, partly because most programs are purely cash

transfers, with little capital expenditure and virtually

no administrative expenditure allocated. Budgets for the

SSAs, scholarships, and midday meals budgets only include

the transfer amounts, with no administrative budget. The SSA

program has execution rates close to 100 percent, sometimes

exceeding 100 percent of the initial allocation owing to

additional allocations during the year. The KEP, which had

some administrative and capital budgets, had expenditure

rates over 90 percent. The safe motherhood program’s

expenditure rates have remained over 80 percent. Execution

rates in scholarships and midday meal programs have varied

more but stayed over 80 percent in most years. Food for

education and RCiW have seen less regularity. Figure 10

shows the execution rates over the last few years.17

2.1.4 Labor Market ProgramsSpending on labor market programs is very low and only

represents about 3 percent of total SP expenditure. Labor

market programs have largely focused on providing short-term

skill training courses with some attention to entrepreneurship.

One major ongoing program is the EVENT ii project, which aims

to provide market-relevant skills trainings and apprenticeships

to 121,000 youth including migrants, by July 2022 in its

second phase. Enhanced Skills for Sustainable and Rewarding

Employment (ENSSURE) supports youth for improved

employability and increased standard of living through

apprenticeship, short training including on-the-job training

(OJT), and further training for those already employed. These

programs mainly cater to urban and peri-urban areas.

The YSEF provides collateral-free loans of up to NPR 500,000

for self-employment activities in commercial agriculture,

agro-industries, and the service sector. The YSEF has supported

about 73,000 individuals since its inception in 2008 and had a

budget of NPR 175 million in FY19.18 in addition, the Women

Entrepreneurship Development Fund under the Ministry of

Figure 10: Budget Execution Rates


16


industry, Commerce and Supplies helps female entrepreneurs

access collateral-free credit for enterprise growth. The fund began

operation in 2015 and has covered only a few hundred individuals.

There is also the President’s Women Upliftment Program under

the MOWCSC which is aimed at improving women’s livelihoods

through empowerment and entrepreneurship support which

includes grant for income-generating activities in agriculture,

tourism, or non-agriculture sector; awareness-raising activities

about early marriage, witchcraft, violence against women

(VAW), and so on; and skills training.

The PMEP also has elements of labor market programs in

its scope, although the initial efforts have been focused

on providing cash for work and subsistence allowance to

the unemployed. The Employment Service Centers (ESCs)

established at each local level under the PMEP are mandated to

provide outreach; registration of the unemployed; profiling and

referral to relevant jobs; and employment promotion services

including skill training, apprenticeship, self-employment, and

enterprise development support. in addition, there are also

livelihood promotion programs such as the Microenterprise

Development and Poverty Alleviation (MEDPA).

2.2 Ability of Social Assistance Programs to Address Risks and VulnerabilitiesWhat does expenditure on social assistance achieve? This

section and the next will attempt to analyze what 1.4 percent

of GDP in FY19 (estimated 2.2 percent in FY20) spent on social

assistance achieves. This section focuses on analyzing whether

the main social assistance programs are in line with existing

vulnerabilities, while the next section will focus on whether

the programs’ benefits—cash, in-kind and services—are

commensurate with the issues that they are designed to address.

Though limited by data availability, the analysis suggests that while

programs address a range of vulnerabilities and have achieved

important outcomes, there are major gaps and challenges:

� Existing programs do not address all risks and

vulnerabilities comprehensively or adequately, by design.

Risks associated with poverty and health shocks are not

adequately covered. indeed, few programs explicitly

target the economically poor or aim to reduce poverty.

� important coverage gaps remain among those eligible

for existing programs, mainly due to implementation

challenges.

� Current programs are not designed with the flexibility to

be scaled up in response to shocks.

� Geographic disparities are only partially addressed by

existing programs.

� Spending is skewed toward the elderly, and little is spent

on early years.

� investments in productive inclusion and labor market

programs are limited.

� Programs are not coordinated around shared human

capital objectives. They focus on singular interventions

and do not complement cash transfers to promote

investment in human capital.

� The lack of coordination has led to some duplications.

2.2.1 PovertyWhile poverty declined significantly in Nepal in the

2000s, a quarter of the population remained poor in

2011. The national headcount poverty rate according to

NLSS iii (2010–11) was 25 percent. Poverty rate varies across

geography, being highest in Sudurpaschim Province (46

percent) and Karnali Province (39 percent) and lowest in

Bagmati and Gandaki Provinces (21 percent, Figure 11). The

multidimensional poverty index (MPi) is highest in Karnali

Province (51 percent) followed by Province 2 (48 percent)

and lowest in Bagmati Province (12 percent). Having young

children is associated with higher poverty (households with

more than three children under the age of 6 have a poverty

incidence of 46.6 percent, compared to 12.3 percent for those

with no children and 25.2 percent for those with one child).

Poverty is also strongly correlated with ethnicity, with Dalits

having a poverty incidence of 46.6 percent, compared to 10.2

percent for Newars. Finally, poverty rates across geography

are closely correlated with other human development

outcomes such as stunting or literacy.

A substantial share of the population is a shock away from

falling into poverty. in addition to chronic poverty, a large

percentage of Nepali households are vulnerable to shocks—

natural disasters, health, or economic shocks—which can

exacerbate poverty. Nepal ranks 138 out of 183 counties

17


19 Notre Dame Global adaptation initiative country index. https://gain.nd.edu/our-work/country-index/rankings/.20 HRVS 2019. See also Ministry of Forests and Environment (2021). 21 Beyond SP programs, government subsidies on agricultural inputs and energy are not targeted to the poor either.22 HRVS 2019, panel survey covering 6,000 households in non-metropolitan areas between 2016 and 2018. It covered six regular programs—senior citizens allowance,

single women allowance, disability allowance, child grant, safe motherhood program and public works, and earthquake relief and other emergency relief. MICS 2019 suggests an improvement in the estimated coverage of households in the poorest quintiles—poorest quintile (51 percent) and second poorest quintile (43.6 percent). However, MICS also included pensions. The Child and Family Tracker Survey (CFT) of the United Nations Children’s Fund (UNICEF) suggests that 21 percent of households receive SSAs—58 percent of which are old-age allowances, 29 percent widow’s allowances, and 21 percent child allowances (UNICEF 2021).

on the climate-related vulnerability index (lower is more

vulnerable).19 One-third of all households faced at least one

shock between 2016 and 2018, including floods, droughts,

and landslides.20 Affected households lost an average of 6.5

percent of assets. Poorer households were overall more likely

to report shocks, especially drought, livestock loss, disease,

and injury. The most remote households were more likely to

report flood, landslide, and agricultural shocks. Typically, such

shocks have a disproportionate impact on the poor and long-

term effects on human capital, especially for children, through

their effects on nutrition, education, and assets. While the

impacts of the COViD-19 pandemic are still unfolding, a

substantial number of vulnerable households are likely to

have fallen into poverty.

Most social assistance programs are targeted to geographic

or demographic categories, irrespective of their poverty

status, which means that many poor households are

not eligible for any assistance. Social assistance programs

Figure 11: Consumption Poverty (2011) and Multidimensional Poverty (2014)

aim to address multiple vulnerabilities including poverty,

life cycle vulnerabilities, and social exclusion. To date, Nepal

does not have a cash transfer program that is targeted at the

poor, similar to the Benazir income Support Program (BiSP)

in Pakistan or the Pantawid Pamilyang Pilipino Program (4Ps)

in the Philippines.21 However, the 2018 Social Security Act

has a provision for a transfer to the economically poor (Social

Security Allowances for the Economically Poor [SSAEPs]) which

could address this gap. For some existing programs, some

demographic and geographic criteria for eligibility, such as

belonging to a Dalit family, are relatively strong proxies for

poverty and exclusion. However, by design, such categorical

targeting excludes the poor who do not fall into any such

categories. As a result, in 2018, less than 40 percent of the

households in the poorest two quintiles were covered by social

assistance programs (Figure 12).22 in the absence of explicit

goals for social assistance programs to reduce poverty, there is

little conversation about the impact of programs on poverty or

about exit strategies from these programs.

Consumption Poverty (2010/11) Multidimensional Poverty (2014)

Source: World Bank Staff Calculation using Nepal Living Standard Survey 2010/11

Source: Nepal National Planning Commission 2018 Multidimensional Poverty index: Analysis Towards Action

18


When categorical criteria are not strongly correlated with

poverty or income, the progressivity of the programs

is limited. in rural areas, the incidence of beneficiaries of

senior citizen and single women allowances was relatively

even across asset quintiles, with between 15 percent and 17

percent of households receiving old-age pensions, as shown

in Figure 13.23 On the other hand, the child grant, by virtue

of being deployed only in the poorest districts and for all

Dalit children, is more clearly pro-poor. As a result of limited

progressivity and low benefit amounts for some categories,

analysis of NLSS iii data suggests that SSAs were responsible

for a decrease of only about 0.5 percent of the poverty

headcount in 2010–11 (given the significant increase in the

SSA benefit amounts since then, this impact can be expected

to have increased). Estimates based on AHS show that poverty

among households with at least one member eligible to

receive senior citizens allowance declined by 2.2 percentage

points when the allowance was doubled to NPR 2,000 in

Figure 13: Percentage of Rural Households Receiving Benefits, across Quintiles

Source: HRVS 2019.

23 Walker, Kawasoe, and Shrestha 2019. Based on HRVS.

Figure 12: Coverage of Social Assistance by Asset Quintile

Source: Estimations from HRVS 2019.

19


2016–17.24 While the overall decline in poverty rate from

27.1 percent to 20.6 percent in 2016–17 is likely due to the

normalization of trade relations with india and recovery from

the 2015 earthquakes, the SSA is also likely to have played a

role among the receiving households. A 2020 survey similarly

showed that child grants were progressive, while old-age

allowances were regressive.25

The SSAEPs provisioned in the 2018 Social Security Act

can help address the coverage gap among the poor. The

act has added the ‘economically poor’ as a constitutionally

defined category of beneficiaries for cash transfers. This would

be the first unconditional cash transfer for the poor. The

design of this new scheme targeted to the poor would mean

that the poor who are currently not eligible for the other

transfers would become eligible to receive a benefit. About

660,000 households in the poorest asset quintile, which do

not currently have a member eligible for senior citizen or

single women allowance, would fall in this category.26 The

beneficiary identification modality and benefit amount of this

new scheme are yet to be defined.

An expansion of the PMEP, a nationwide cash-for-work

program targeted to the working age poor, could also

increase the sector’s impact on poverty. Unemployed

people have to register at ESCs at the local level to apply

for the program. Self-selection based on work requirement

is expected to result in a large share of benefits reaching

the poorest. in addition, the PMEP has criteria to prioritize

the most vulnerable in case the number of applicants

exceeds the number of days of work available. By ensuring

that beneficiaries also have access to skills training and

other services, the PMEP can also contribute to increase

beneficiaries’ productivity or employability and reduce their

reliance on public works in subsequent years. The ESCs can

also play a role in providing information about employment

as well as skill training opportunities, counseling,

intermediation, and referrals to relevant services.

Two other interventions focusing on the poor are a

scholarship scheme and the waiver on health insurance

premium. While most scholarship schemes are provided to

demographic categories, one of them is poverty targeted (it

offers poor students in Grades 9–12 an annual benefit ranging

from NPR 8,000 to NPR 24,000 depending on the course and

the grade level). However, the scheme is small and covered

only about 34,000 students in FY19. The national health

insurance scheme is designed so that premiums are waived

for households identified as poor. However, this waiver does

not cover all the poor enrolled in the scheme yet, as the

identification of poor households has only been completed

in a few areas. in addition, Nepal has decided to waive the

insurance premium also for all citizens over the age of 70,

irrespective of their poverty status. This is a different approach

to that adopted in many countries, where subsidies focus on

children since households with children tend to be poorer.

The identification of the poor and vulnerable

remains unclear, both in terms of policy and actual

implementation. This poses challenges for programs that

have an element of poverty targeting, such as the health

insurance scheme, the PMEP, or the new SSA transfer for the

economically poor. identification of the poor is a challenging

task, fraught with errors. However, the Government of

Nepal already has a process under way to identify poor

households which can be strengthened. The Poor Household

identification and Standards Section, the entity in charge of

identifying the poor under the MOLCPA, completed the listing

of poor households in 26 districts (249 local levels) in 2013.

The responsibility for data collection has now been devolved

to the local levels. As of August 2020, data collection is near

completion in 23 districts (213 local levels). in FY20, funds

for data collection have been transferred to some local levels

in these 23 districts and 15 new districts, for a total of 396

local levels in 38 districts. Data analysis to identify the poor

households remains to be completed.

24 Since the survey does not record ethnicity, Dalits of age 60–70 are not included in the estimate, which may therefore be an underestimate. 25 See UNICEF Baseline CFT, as reported in UNICEF (2021).26 Estimates based on NLFS III 2017–18.

20


The Government of Nepal has committed to establishing

a social registry across the entire country, to be used by

all SP programs. The integrated social registry would store

demographic and socioeconomic data on all households, with

regular updates to ensure households’ evolving conditions

are captured. Each program could then draw from the social

registry as part of the process for the identification of its

beneficiaries, applying its own eligibility criteria.

2.2.2 Shocks and DisastersThe current social assistance programs are not designed

to be scaled up in response to shocks. Existing programs

are also not designed to support shock-affected households.

There are no contingency funds linked to any of the existing

programs. The conversation on linking social protection to

disaster risk management is a nascent one in Nepal (Ministry

of Forests and Environment 2021). Except in case of a large

covariate shock like the 2015 earthquakes where extensive

humanitarian assistance was mobilized, households do not

receive public assistance to cope with smaller but recurrent

shocks like floods or landslides (HRVS 2019).

Both the SSAs (including the proposed transfer to the

economically poor) and the PMEP can be developed into

scalable programs to respond to shocks. The SSAs and the

PMEP could be scaled up in response to COViD-19 to provide

assistance to those affected (if shocks prevent public works

from operating or expanding, as in the case of the PMEP, the

work requirement could be relaxed to provide cash transfers

even in the absence of work). Using the SSAs, including the

planned SSAEP, or the PMEP to respond to shocks could

entail both vertical expansion (whereby existing beneficiaries

receive increased benefits for a limited duration) as well as

temporary horizontal expansion of the program (whereby

new beneficiaries are temporarily added to the program) to

include non-beneficiary households affected by the shock.

Such a horizontal expansion requires robust information

systems to identify vulnerable households pre disaster and

Note: Social insurance and labor market programs are in italics. The analysis presented in this section focuses exclusively on social assistance programs.

Figure 14: Social protection Programs across the Life Cycle

Pregnancy and Early Childhood (0–5)

� Safe motherhood

program

� Child nutrition grant

� Nutrition

supplements

� SSF: Maternity benefit

Childhood and adolescence (5–15)

� Scholarships

� Midday meals

� Children’s homes

Active Age Adults

� PMEP

� Single women allowance

� Skills training programs

� SSF schemes: Medical

treatment and health;

accident and disability;

and dependent family

benefits

Elderly

� Senior citizen allowance

� Old age homes

� Public sector pensions

� Provident funds

� SSF scheme: Old age

pension

Programs across the life cycle

� Endangered ethnicities allowance Disability allowance � National health insurance Poor citizen’s medical treatment fund

People's housing programFood subsidies

21


affected households post disaster. The integrated social

registry and its demographic and socioeconomic data on

households would enable a quick expansion of programs in

times of shock.

2.2.3 Vulnerabilities across the Life CycleWith the launch of the PMEP, there is at least one program

that corresponds to the vulnerabilities associated with

each stage of the life cycle, but coverage remains a

significant challenge for some of them. The challenges relate

to a combination of program design issues, implementation

failures, and/or budget constraints. As Figure 14 shows, there

are programs that are designed for individuals from pregnancy

to old age. However, two key challenges remain: first, the

coverage of all vulnerable in each stage and, second, the

adequacy of benefits provided. Coverage gaps are discussed

in this sub-section, while the adequacy of selected schemes is

analyzed in the next sub-section. The last section of this chapter

focuses on the cost that would be entailed by programs having

full coverage of all eligible individuals or households.

Overall, social assistance expenditure is heavily skewed

toward the elderly. Despite the growing consensus about

the need to invest in early years for human development

outcomes, the share of social assistance expenditure on

early childhood is only 8 percent (Figure 15A). On the other

hand, 51 percent of the total social assistance expenditure

is spent on the elderly. This bias would be even larger if one

also took contributory pensions into account: spending on

the elderly would then increase to 75 percent of the total SP

spending. Programs for the working age population, with

about 21 percent of social assistance expenditure, are also

not fully developed yet. if we contrast this with the share of

these groups in the population, the bias is striking. Children

Figure 15: Total and Per Beneficiary Social Assistance Expenditure by Life Cycle in FY1927

Source: Estimates based on Red book and program data

B. Per Beneficiary Social Assistance ExpenditureA. Total Social Assistance Expenditure

27 Programs included in the analysis are safe motherhood program, child grant, midday meals, scholarships, higher education scholarships, public works programs, single women allowance, Garib Sanga Bisweswor program, senior citizen allowance, endangered ethnicity allowance, disability allowance, poor citizen medical treatment fund, Nepal Food Corporation, people’s housing program, food subsidies, and some MOWCSC programs. Senior citizen allowance in FY19 was NPR 2,000. The difference in per capita benefit size would be starker in FY20 when the senior citizen allowance was increased to NPR 3,000 and further increased to NPR 4,000 in FY22.

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under five constitute 9 percent of the population (but receive

8 percent of expenditure) while senior citizens over 70

constitute only 4 percent of the population (but receive 51

percent of expenditure).

The low share of total expenditure on certain age groups

results partly from varying benefit sizes. Beneficiaries of

programs for pregnancy and early childhood and childhood

and adolescence constitute 65 percent of the total number

of beneficiaries but receive only 19 percent of the total

expenditure. Estimates of per capita expenditure across

life cycle in FY19 shows that senior citizens receive benefits

that are over five times those received by children below

five (Figure 15B). To illustrate the differences in benefit size,

among the SSAs, the monthly benefit of child grant is NPR 400

compared to senior citizen allowance at NPR 3,000. Similarly,

while scholarships at the basic level have a large coverage (a

2014 survey showed that 76 percent of girls and 98 percent of

Dalits received scholarships), the very low benefit level results

in a small share of expenditure allocated to this group.

The low share of total expenditure on certain age groups

results also partly from the limited coverage of some

programs, such as the child grant. For early childhood

support, some of the vulnerable are not covered by design.

For example, the child grant currently only covers all Dalit

children nationwide and all children in 25 selected districts.

it thereby excludes non-Dalit poor children in most parts of

the country. A study of 6 districts in 2019 suggested that the

child grant covered 51.5 percent of the eligible (Figure 16).28

This issue of coverage should be addressed over time, as the

program is being rolled out to other districts gradually, with

planned expansion to 11 new districts (99 local levels) in FY21.

in addition to geographic expansion, coverage could also be

increased by supporting all eligible to acquire birth certificates.

Similarly, among the SSAs, the disability grant has

particularly high rates of under-coverage. Estimates of

under-coverage in disability grant range from 13 percent

to 47 percent across surveys. According to the HRVS 2019,

which covered all non-metropolitan areas, 47 percent of

Source: Bhandary et al. 2019.Note: Total N: 3747. 95% Confidence intervals plotted. Weighted estimates The horizontal line indicates the overall average (mean=66.1%)

28 Bhandary et al. 2019. The study covered only six districts and coverage varied across the six districts.

Figure 16: Coverage of SSA among Eligible individuals by SSA type

23


individuals who have a red or a blue card certifying them

as people with profound or severe disability and therefore

eligible for the disability grant are currently not receiving the

grant. A 2019 Oxford Policy Management (OPM) survey of

6 districts estimated that 13 percent of those with blue and

red disability cards do not receive the allowance (Bhandary

et al. 2019). Given the constraints in certifying disability, the

actual under-coverage of the grant could be much higher.

The OPM study estimated that only 43.3 percent of those who

are eligible according to the assessment of functioning ability

are currently receiving the benefits. On the other hand, the

senior citizen allowance and the single women allowance are

found to reach about 85 percent of their respective eligible

population in the survey of six districts.

Ensuring all have access to legal documentation is also

critical to ensuring coverage. An estimated 6.7 million

people in Nepal do not have citizenship certificates or other

legal documentation (FWLD 2015). This lack of legal identity

can severely affect the ability of the poor and/or vulnerable

to access SP schemes (in addition to limiting access to

finance, such as opening bank accounts and accessing

loans). Similarly, many of the nearly 20,000 refugees in

Nepal are without documentation. Efforts to intensify civil

registration outreach and ensure timely issuance of legal

identity documents are critical to increase coverage of social

assistance programs to Nepal’s most vulnerable members.

Another area of concern is health shocks, which are

not covered adequately. The risk of catastrophic health

expenditures in Nepal due to an illness or injury is high, as

households bore 55 percent of total health spending directly

out of pocket in FY16 (MOHP 2018a). This is high relative

to that of countries like Thailand (12 percent), Vietnam (43

percent), and Sri Lanka (38 percent), which exhibit better health

outcomes (World Bank 2019). The national health insurance

program is supposed to cover all households nationwide

eventually; however, the coverage remains low at about 12

percent of the households nationwide. Till date, the program

has been rolled out in 51 districts. The impact of the health

insurance scheme on health-seeking behavior, out-of-pocket

expenditures, and health outcomes is yet to be studied.

Furthermore, existing programs focus on singular

interventions (for example, providing only cash, service, or

training on their own) and are implemented in isolation from

each other, which limits their impact. Most vulnerabilities

or low human capital outcomes are associated with multiple

constraints, and the most effective programs typically combine

various elements—cash transfers plus information sessions

on nutrition and care for ECD, training plus seed capital, and

so on—to address these multiple constraints. To date, most

existing programs offer only one benefit—cash, or service, or

training. in addition, for early years programs, interventions are

not coordinated with each other to ensure that a child receives

all the benefits and services for which s/he is eligible across

social protection, health, and education. This is evidenced by

starkly different coverage rates across programs. For example, 78

percent of children ages 12–23 months receive all basic vaccines

but birth registration rate of children under 24 months remains

at 40 percent.29 Mobilizing vaccination campaigns to capture

unregistered births would help increase birth registration rates.

More generally, there are currently no referral mechanisms that

would allow individuals or households to navigate between

programs, as their conditions evolve.

In addition to the lack of protection from shocks discussed

earlier, a missing element in the current mix of SP

programs is a focus on productive inclusion and resilience.

Families living in poverty and social vulnerability are more

likely to be engaged in informal jobs and/or subsistence

activities. They are likely to face multiple constraints—low

productivity, skills mismatch, limited access to information

and the jobs market, and lack of socioemotional skills—

which affects their ability to earn a decent livelihood, enter

and progress in the job market, and invest in their children.

Productive inclusion aims at addressing multiple constraints

in a comprehensive manner while enhancing income-

generating capacity of such groups. The package of such

interventions could include (a) labor intermediation and

29 Demographic and Health Survey 2016.

24


activation policies, (b) activities to increase productivity of

household activities (farm and self-employment) covering

both hard and soft skills and diversify source of income,

and (c) better access to information and markets (credit

and inputs). Within the existing programs, the skills training

programs tend to be focused on urban and peri-urban areas

and often do not reach the poorest.

There is a range of livelihood programs in Nepal

implemented by the government and development

partners, which, if linked to social assistance programs,

could provide more comprehensive support to the

poor and vulnerable.30 These include schemes such as

Microenterprise Development and Poverty Alleviation

(MEDPA) and others like the Rural Self Reliance Fund, interest

subsidy on commercial agricultural loans to the youth, and

informal Sector Enterprise Development and Employment

Generation Program (ELAM). However, these are not linked to

any social assistance programs in design or implementation.

These programs could be systematically linked to programs

such as SSAs and the PMEP to provide more comprehensive

support to the poorest.

2.3 Adequacy of Benefits and Impacts of Selected Social Assistance SchemesBecause most SP programs do not have explicit goals, it is

difficult to assess both the adequacy of their benefits and

their impacts on outcomes. An analysis of five schemes (SSA,

scholarships, midday meals, safe motherhood program, and the

PMEP) shows that while that the programs have helped achieve

some outcomes, challenges stand in the way of the investments

achieving their full potential outcomes. in particular, benefit

amounts are not adequate in many cases, as discussed in this

section. Furthermore, programs typically stand alone and are not

coupled with complementary interventions that could increase

the impact of investments (see Section 2.2.3).

2.3.1 Social Security AllowancesAlthough in operation for over 20 years, the objectives

of the SSAs are not clearly defined, with the exception of

the child grant and its nutrition goal. The Social Security

Program implementation Guidelines 2075 state that the SSAs

are to provide social protection to those classes, areas, and

communities that are economically and socially behind. The

Constitution has defined the following groups as having a right

to social security: (a) economically poor, (b) senior citizens, (c)

incapacitated and helpless, (d) single women, (e) persons with

disabilities, (f ) children, (g) those who are unable to take care

of themselves, and (h) endangered ethnicities. The 2018 Social

Security Act subsequently simply defined social security as the

cash assistance provided to these groups without elaborating

the objectives of such assistance. Transfers are perceived to be

aimed at a range of things: recognition of senior citizens for

their contribution to society, improving access to other services,

income support, and so on.

Few studies have focused on the outcomes or impact

of the SSAs. Most have focused on studying coverage and

implementation processes. A 2016 study concluded that

most senior citizens perceived the allowance to be an honor

and recognition by the state and that it had improved access

to health services and boosted their dignity and their role in

family decision-making has improved (New Era 2016). The

study noted no real impact on quality of life for very poor

participants, given the limited benefit size at the time (NPR

1,000 per month for senior citizens and those with full disability

and NPR 500 for other beneficiaries at the time of the study).

The benefit amount has since been increased to NPR 2,000

per month (NPR 24,000 per year) for senior citizens and single

women and NPR 3,000 per month (NPR 36,000 per year) for

those with disability and endangered ethnicities.31 The higher

benefit amount can be expected to achieve greater impact in

terms of poverty reduction and quality of life.

The limited impact on nutrition of the child grant is likely

linked to a combination of limited coverage and low

benefit value. Figure 17 shows that while most SSA benefits

were increased significantly over time, including an NPR 1,000

increase in FY20, the child grant remains very low at NPR 400

a month. Considering inflation, this is equivalent to NPR 221

30 These livelihood programs are not considered as SP programs in this analysis.31 For reference, the current official poverty line based on NLSS III is NPR 19,261.

25


32 All SSA benefits will be increased by one-third in FY22, which increases the discrepancy between child grant and senior citizen allowances.33 MICS 2019 shows an improvement in birth registration rate. The provinces with universal child grant show higher rates, Karnali Province (84.4 percent) and Sudurpaschim

(89.1 percent) compared to the national rate of 77.2 percent.

Figure 17: Evolution of SSA Monthly Benefits over the Years (Nominal)32

in FY11 NPRs. Overall, child grants beneficiaries receive only 6

percent of SSAs while comprising 25 percent of beneficiaries

(UNiCEF 2021). in most cases, the transfer only represents a

marginal contribution to household incomes. A 2015 study that

surveyed Dalit families in Bajura and Saptari districts concluded

that the grant contributed to expenditure on essential food and

non-food items (Hagen-Zanker and Mallett 2015). The grant

facilitated some improvements in dietary diversity among

the beneficiary households, enabling them to purchase more

‘desirable’ foods. it also enabled a greater number of meals

and allowed children to eat bigger portions. However, the

study also concludes that the value of the grant was too low

(NPR 200 at the time of the survey) to have a strong impact on

beneficiary households.

Besides its limited impact on nutrition, the child grant has

had positive impacts on rates of birth registration, which is

an eligibility criterion to access the grant. Birth registrations

are the highest in Karnali Province, where child grant was

universal in 5 out of the 10 districts in 2016, at 65 percent

compared to the national average of 56 percent according to

Demographic Health Survey (DHS) 2016.33 As discussed later,

however, the program could have greater impacts if combined

with other interventions promoting behavioral changes.

2.3.2 ScholarshipsThe benefit levels of scholarships vary widely across the

schemes. The scholarships for girls and Dalit children, the

two schemes that reach over 2 million beneficiaries, offer a

very small annual benefit of NPR 400 (equivalent to just NPR

33 per month). A 2015 joint review of Education for All by the

MOEST and United Nations Educational, Scientific and Cultural

Organization (UNESCO) noted that NPR 400 per year per child

is “helpful but hardly adequate to cover school expenses, let

alone to compensate the opportunity costs.” For the girls in

Karnali, the benefit level is increased to NPR 1,000 per year

(NPR 83 per month) in Grades 1–5 and NPR 1,500 per year (NPR

125 per month) in Grades 6–8. The benefits are much higher

26


in other scholarship schemes, albeit with lower coverage, such

as those for conflict affected, martyr’s children, freed Kamalari,

and some residential scholarships.34 Overall, girls and Dalit

children in basic education constitute over 80 percent of all

scholarship beneficiaries but received less than 40 percent of

the total scholarship benefits in FY19.

Past assessments on impacts of scholarships have shown

mixed results. The impact on enrolment is found to be

significant in the years immediately following the introduction of

the schemes. According to the Project Performance Assessment

Report of Education for All, scholarships have been perceived as

having made a significant impact on access of girls, Dalits, and

Janajatis. For example, the net enrolment rate for girls increased

by 6 percentage points between 2003, when the scheme was

expanded to cover all girls, and 2005. The Gender Parity index

(GPi) in primary education has improved from 0.83 in 2003 to

0.98 in 2008, indicating significant improvement in girls’ access.

Beyond enrolment, the impact on attendance and retention

in school has been minimal, likely due to the small size of

the benefit for cases of basic education scholarships. There

is little difference between beneficiaries and other children in

terms of school attendance and promotion rates: beneficiaries

are 3.8 percent more likely to attend school than other children,

but they are only 1.2 percent more likely to get promoted

than other children.35 Scholarships also do not seem to deter

dropout rates which increase after Grade 5 all the way till Grade

10 (Flash Report 2019).

Fewer scholarship schemes are available at the secondary

level. While some schemes provide benefits from Grades 1–10

(for example, scheme for Dalit students and those with disability),

few specifically target students at the secondary level (Grades

9–12). Notably, they include the only poverty-targeted scheme

for secondary students and the scheme for poor Dalit, Chepang,

and Raute students. The former only covered 34,000 students in

FY19. Given the low net enrolment rate at the secondary level,

expanding the coverage of secondary-level scholarships could

be critical to enhance this outcome.36

2.3.3 Midday MealsThere are two models of the midday school meal program,

the Government’s cash-based program in 33 districts and

the WFP-financed food-based program in 11 districts.37

The latter covers over 1.3 million students in early childhood

education and development (ECED) and primary schools. The

average value of a meal is set at NPR 15 per child per day in

both cases, provided for 180 school days a year. A pilot study

of home-grown school feeding conducted by the WFP in

two districts - Sindhupalchok and Bardiya - concluded that

the cost per child per meal ranged from NPR 21.0 for larger

schools (over 150 children) to NPR 33.5 for smaller schools

(less than 50 children) and recommended an increase of at

least NPR 3–5 per meal.38

Midday meals are considered to have improved enrolment

and retention in school. Assessments of the Government’s

program are hard to come by, but a study suggested that

the WFP’s school meal program and its complementary

interventions have enabled better learning environment at

schools and improved attendance, retainment in school after

lunch, and some learning outcomes (WFP 2019). Absenteeism

declined over the project period, with attendance rate

increasing from 60 percent to 82 percent. With complementary

water, sanitation, and hygiene (WASH) activities, the program

has also contributed to increased health and hygiene practices,

demonstrating the value of complementary interventions. The

study reported mixed results in terms of learning outcomes,

with improvements in some areas but decline in others.

34 Conflict affected: NPR 10,000–16,000; martyr’s children: NPR 12,000–24,000; freed Kamalari: NPR 1,500–10,000.35 2014 Public Expenditure Tracking and Quantitative Service Delivery Survey. The survey also indicated that 76 percent of girls and 98 percent of Dalits receive

scholarships—reflecting universal coverage for Dalits and increased coverage for girls consistent with the Government’s recent policy to aim for universal coverage of girls scholarship.

36 The net enrolment rate declines from 92.7 percent in basic education to 46.4 percent in secondary. At higher secondary (Grades 11–12), the net enrolment rate is even lower at 24.7 percent (Flash Report 2018–19).

37 The midday meal program has been rolled out nationwide from FY21.38 This is a new approach aimed at addressing common challenges in the cash-based model including issues of meal quality, misuse of funds and delays in fund flow, and

increase in local community engagement. This involved purchasing locally produced food by linking the schools to a local agricultural cooperative (Shrestha et al. 2020).

27


2.3.4 Safe Motherhood ProgramThe Safe Motherhood Program was introduced to

incentivize safe deliveries. The program, introduced in

2005, has evolved over the years to combine demand- and

supply-side payments: the maternity incentive scheme (2005),

reimbursement to health facilities in selected districts (2006,

renamed as the Safe Delivery incentive Program [SDiP]),

universal free-delivery (renamed as Safe Motherhood Program

2009), merging of the four antenatal care visits (2012), and the

merging of the free sick newborn care (2016). This is a good

example of a program which has been enhanced over time,

building on the results of regular evaluations.

The rate of institutional delivery has increased dramatically

from 18 percent in 2006 to 57 percent in 2016 and 77.5

percent in 2020.39 Supply-side improvements in the availability

of health facilities played a key role, but some of this increase

can be attributed to this program. The cumulative effect of

the maternity incentives scheme, SDiP, and Aama programs

has been an increase in the rate of facility delivery by 25.5

percentage points in Terai and 13 percentage points in hills and

mountains.40 This is likely to be due to easier access to facilities

in Terai compared to more remote hills and mountains, although

institutional delivery rates, particularly in Province 2, remain low.

Around the same time, the maternal mortality ratio in Nepal

declined from 281 maternal deaths per 100,000 live births in

2006 to 239 in 2010 (after a dramatic decrease from 850 in 1990).

Disparities in the rates of facility delivery across provinces

and quintiles remain. Only 36 percent of women in the

bottom quintile deliver at facilities, compared to over 90

percent among those in the top quintile; only 38 percent of

women in Karnali Province deliver in facilities, compared to

73 percent in Bagmati Province.41 Further improvement in

access will therefore require greater attention to access by the

poor and in remote areas, with a focus on behavior change

communication. The benefit size, doubled in FY19, varies

according to geography to reflect the higher costs in remote

areas: NPR 3,000 in mountain, NPR 2,000 in hill, and NPR 1,000

in Terai areas. The benefit is likely to be insufficient to cover all

costs families incur in getting to a health facility, but transfer to

mothers is meant to cover only part of the transport costs.

2.3.5 Prime Minister’s Employment ProgramThe PMEP benefits are higher than those of other programs,

but their receipt is conditioned on work. A beneficiary working

for 100 days in the year would receive a total benefit of NPR

51,700 at the current minimum wage in FY21. in the absence

of work, the program guarantees an income of minimum of 50

days’ worth of wages or NPR 25,850 per year. This represents 58

percent of the 2011 annual poverty line of NPR 19,261, assuming a

household size of 4.6. The program could have significant impacts

on the income and poverty status of the poorest. impacts have

not yet been assessed since the program is only in its third year.

The relatively high benefits will make covering all those eligible

a challenge, as illustrated by the fact that 1.2 million individuals

registered in FY20, but the budget allocated for wages under the

program was sufficient to cover only 60,000 individuals. in FY21,

over 750,000 individuals have registered as unemployed while the

budget is sufficient to cover only 200,000 individuals.

2.4 Policy Coherence, Coordination, and Complementarity of Interventions2.4.1 Policy Clarity and CoherenceNepal does not have a single overarching policy

framework or institution to guide SP policies and

programs. in the absence of an overarching policy and

institutional framework, SP programs have emerged from

annual budget speeches over the years in an ad hoc manner.

The SSA was announced in the 1995 budget speech and

expanded in successive years. The legal basis for these

programs was finally provided by the 2018 Social Security

Act. Many other laws have been passed in the last two years,

including the Contribution-based Social Security Act 2017 and

the Right to Employment Act 2019. However, these laws do

not refer to each other or complement each other to provide

39 DHS 2016 and Central Bureau of Statistics 2020.40 Ensor, Bhatt, and Tiwari (2017), based on the analysis of three rounds of National Demographic Health Survey (NDHS) (2001, 2006, and 2011).41 Aryal et al. 2016, 20. Based on Nepal DHS 2016.

28


a comprehensive protection for the poor and vulnerable.

With few exceptions, these programs operate independently

without policy or operational links to each other.

The lack of policy coherence has also led to some

duplications, including in health-related social protection

schemes and public works. indeed, in addition to the

national health insurance program meant to cover all

households, the SSF includes medical treatment and health

schemes meant to cover all workers. These two schemes

overlap in terms of target groups but have different premiums

and cover different levels of expenditure: the national health

insurance offers coverage of up to NPR 100,000 for a premium

of NPR 3,500 for a family of five while the SSF scheme covers

expenses up to NPR 100,000 for a contribution of 0.7 percent

of individual workers’ salary.42 Furthermore, in addition to

the full subsidy of the national health insurance premium for

the poor and those over the age of 70, poor households can

also get support from the Poor Citizen Medical Treatment

Fund. And citizens over the age of 70 also receive the monthly

medical treatment allowance of NPR 1,000. Citizens over the

age of 70 therefore get NPR 12,000 in cash plus insurance

coverage up to NPR 100,000. For cash-for-work programs,

while RCiW has been discontinued, Karnali Province has

initiated the Chief Minister Employment Program similar to

PMEP in its design.

Coordination across programs could also help simplify

program administration while ensuring increased coverage.

For example, the process of enrolment into senior citizens

allowance program could serve as a point of enrolment for the

health insurance program for the elderly. This would ensure that

about 85 percent of the senior citizens would be covered by health

insurance. Such coordination would require robust program

management information systems (MiSs) that are interoperable.

An integrated social registry could serve as a shared instrument for

data collection on households conditions and for the identification

of beneficiaries of various programs (Box 3). This would also enable

better monitoring of programs and an analysis of the extent to

which risks and vulnerabilities are covered.

Finally, the limitations of this analysis highlight that

mechanisms for program monitoring and evaluation

need to be strengthened. Currently, systemic monitoring

of programs, outcomes, and impact is weak, and external

monitoring and evaluation is ad hoc. Finding accurate and

reliable data is challenging: administrative data, particularly

data on beneficiaries, are not very reliable and sometimes

inconsistent. Allocating resources for administrative expenses

and strengthening monitoring and evaluation systems are

essential steps to improve the sector and maximize its impacts.

To provide Nepal with a strong basis for an efficient and

effective SP system, it is critical to adopt a social protection

framework. Such a framework, with clearly defined objectives,

strong institutional mechanisms, and instruments can provide

clarity on the objectives of investment in SP and promote

coordination and efficiency across programs. A committee led

by the National Planning Commission is currently finalizing a

draft for the SP framework.

2.4.2 Coordinating Interventions and Ensuring Transitions across ProgramsWhile Nepal has deployed a range of programs aimed at

addressing vulnerabilities across the life cycle, there is no

mechanism to help individuals access relevant programs or

progress from one to another. Ensuring a smooth transition

from one program to the other is an essential part of a strong

SP system, allowing households or individuals to enroll in

programs which are relevant for their situation during their

life cycle. For example, there could be a mechanism to ensure

that a beneficiary of Safe Motherhood Program systematically

or automatically registers her child’s birth. Ensuring that all

children born in health facilities have their births registered

through coordination between the health facilities and the

ward offices would then help registered children avail other

benefits and services. Mechanisms could also ensure that

child grant beneficiaries also attend early childhood care and

education and get their vaccinations. Particularly in the early

years, coordination across health, education, and SP to deliver

an integrated package of programs could improve human

42 The total contribution to SSF is 31 percent which is divided as follows: old-age pensions (28.33 percent); accident and disability (1.40 percent); dependent family security (0.27 percent); and medical, health, and maternity (0.7 percent on medical and 0.3 percent on maternity).

29


Box 3: Potential Role of Social Registry in Nepal to improve Coordination across Programs

Globally, social registries are increasingly used to improve the efficiency and effectiveness of the delivery of social programs and services. Social registries are ”information systems that support outreach, intake, registration, and determination of potential eligibility for one or more social programs” (Leite et al. 2017). As an information system, they include information on individuals and household levels that may be used by multiple programs to identify and assess the eligibility of their target beneficiaries. As gateways to multiple programs, social registries also play the role of an inclusion system to help coordinate the delivery of complementary benefits and services to (often common) target population groups. Social registries aim to improve the efficiency and effectiveness of the delivery of multiple programs and as such provide a framework for increased coordination across programs.

The delivery of social protection programs in Nepal remains fragmented, relying on information systems that are themselves at different levels of development. The lack of a broader policy framework to coordinate across federal agencies and the lack of clarity on interoperability and data-sharing provisions between programs both limit the potential for coordination. However, the decentralization of most program delivery responsibilities to local levels provides an opportunity to better integrate and coordinate between programs. This in turn can help increase

the coverage of programs which target similar population groups. Social registries can play an important role in this regard. They would, for example, help households identified as poor sign up for health insurance subsidy or secondary school scholarships. Or they could link the registration of a birth in a household to the eligibility assessment and registration process of programs such as child grants, vaccinations, or early childhood development programs, as the child progresses through the early years.

The Government has taken the initiative to explore the policy and institutional frameworks needed to set up and operationalize a social registry. it is also building the foundations of a social registry, by linking individual-level identification data with household-level socioeconomic data collected at the local level, and developing a platform for the SSA program to identify its beneficiaries. The Government aims to progressively link the national social registry platform to various administrative and program information systems, gradually building a dynamic national social registry that enables the coordination and monitoring of programs across agencies and government levels. This calls for a long-term ‘whole-of-government’ approach that prioritizes moving the country toward a digitized, coordinated, and effective delivery system for social services and provides the policy and fiscal space to continue investment toward realizing this vision.

capital outcomes. Gains in coverage could be substantial: for

example, 78 percent of children ages 12–23 months receive

all basic vaccines, but birth registration rate of children under

24 months remains at 40 percent. Mobilizing vaccination

campaigns to capture unregistered births would help increase

birth registration rates. The devolution of most of these

programs to the local level, in addition to the role local levels

play in the implementation of the federal programs, offers great

opportunity to improve coordination.

The importance of coordination of interventions is also

essential to boost impacts. in the case of the child grant,

30


Box 4: Cash Transfer Programs as Mechanisms to Promote investment in Human Capital

Cash transfer programs have become popular over the past two decades. While there are important differences in implementation across countries, some programs share one important feature: they encourage beneficiaries to adopt positive behaviors. They typically aim to promote school attendance, improve nutrition practices, or encourage regular immunization and health care visits. Some programs in Africa also focus on civil registration, ECD, hygiene, and sanitation by linking across various programs or adding messaging.

While some programs do not impose strict conditions but communicate strongly around specific behaviors, others monitor the adoption of certain behavior or the use of services and impose penalties. integrating conditions must consider supply-side constraints in provision of services and be designed in a way that does not exclude particular groups. A few examples are listed in the table below.

Country Program Description

Burkina Faso Burkin-Nong-SayaThe program requires participation in social and behavioral change communication activities related to nutrition and ECD.

Sierra Leone Social Safety Net Program

The program provides messages focused on human capital, particularly maternal and child health. COViD-19 pushed these messages to be conveyed through a series of communication campaigns (posters, radio discussions, and so on), and the Government of Sierra Leone is piloting a decentralized model of delivery of workshops (by training local community members). Listening to the messages (or participating in workshop) is not mandatory to receive the transfer.

SenegalProgramme National de Bourses de Sécurité Familiale (PNBSF)

The program explicitly specifies three conditions around school attendance, vaccination, and birth registration. However, these are not monitored. instead, the program uses the participation in promotion sessions as a condition for the receipt of transfers.

KenyaCash transfer of the Orphans and Vulnerable Children (OVC) Program

The program encourages orphans and vulnerable children’s attendance in primary school and visits to health centers for immunizations and other interventions. it encourages compliance but does not apply penalties for noncompliance. However, despite the absence of penalties, 84 percent of beneficiaries believe they must follow rules to continue receiving payments.

TanzaniaProductive Social Safety Net (PSSN) Program

The program imposes conditions on the use of health care and education services. To monitor compliance, data from health centers and schools are entered into the program MiS, and payments are made every two months. Compliance is tracked after the first payment cycle. Penalties are deducted from the subsequent payment cycle.

Rwanda

Nutrition Sensitive Direct Support (NSDS), part of the Vision 2020 Umurenge Program (VUP)

NSDS aims at incentivizing intake of essential health and nutrition services during early years. Co-responsibilities are (a) attending all antenatal care during pregnancy, (b) attending all recommended postnatal care, and (c) taking children to all recommended growth monitoring and promotion sessions. Noncompliance is monitored. Noncompliant households are visited and encouraged/advised to comply. Persistent noncompliance may result in payments being suspended as the last course of action.

Brazil Bolsa Familia Program

The program explicitly specifies three conditions around school attendance, vaccination, and prenatal care. To monitor compliance, data from school’s attendance are entered into the program MiS every two months. Health centers report the information every six month. Payments are made every month. Compliance is tracked after the first payment cycle. Penalties are deducted from the subsequent payment cycle.

Philippines4Ps Conditional Cash Transfer (CCT)

The program explicitly specifies conditions around the use of maternal/child health services, school attendance, and participation of monthly Family Development Sessions (FDS)—child health monitoring (0–5 years), deworming pills (1–14 years) day care or pre-school (3–4 years), and school attendance (5–18 years). Compliance is monitored at health and education facilities as well as FDS meetings. Noncompliance would incur corresponding deduction from grants after a temporary suspension.

31


for instance, information dissemination around the grant

has contributed to better nutrition and hygiene behavior.

Children of beneficiary households were found to be 11

percent more likely to receive vitamin A and to be dewormed

compared to non-recipients (Hagen-Zanker and Mallett 2015).

While the impact of unconditional cash transfers on children’s

nutritional status in five Karnali districts was not significant,

a ‘cash plus’ approach adding complementary interventions

including behavior change communication, awareness about

birth registration, and hygiene and sanitation, along with the

cash, yielded some positive results (Renzhao et al. 2019).

Cash transfer programs could achieve more impact

by adding accompanying measures to promote the

adoption of good practices in nutrition, early childhood

development, and education. They could also stimulate

the use of specific basic services by encouraging or

requiring health care visits, growth monitoring sessions,

or school attendance. These mechanisms used to promote

positive behavior or service use can include requirements

to participate in promotion sessions and to conform

with desirable behaviors, with or without verification of

compliance and with or without sanctions for noncompliance.

Box 4 elaborates how cash transfer programs can serve as

mechanisms to promote investment in human capital by

integrating such other elements.

Similarly, the delivery systems established for the PMEP—

particularly the ESCs—could add value by promoting

access to elements of productive inclusion. Productive

inclusion initiatives aim to address multiple constraints

this group faces—low productivity, skills mismatch, limited

access to information and the jobs market, and lack of

socioemotional skills. Cash for work could integrate skills

training, both hard and soft skills.43 Looking beyond cash

for work, the ESCs can provide a range of services to the

unemployed or underemployed—ensure better access to

information on employment and training programs, provide

referrals, and facilitate access to market.

2.5 Analysis of Fiscal Implications of Social Assistance ReformsA series of simulations helps assess the fiscal implications

of social assistance reforms in Nepal. As described earlier,

social assistance expenditure has increased from 0.9 percent

to nearly 1.4 percent of GDP between FY09 and FY19,

with allocations for FY20 at 2.2 percent of GDP. it is critical

to rigorously project expenditure in the future to inform

planning and policy reforms. This section analyzes how the

overall cost of social assistance programs could change over

the next 10 years under different scenarios. The baseline

scenario (scenario A) assumes that existing programs

maintain their current coverage rates and that benefit levels

are indexed to inflation.

We present a series of scenarios that seek to address

the two key challenges identified in the analysis: the

inadequate investments in children and the limited

coverage of the poor and limited impact on poverty.

The scenarios simulate in turn the expansion of the child

grant in benefit size and coverage, the expansion of the

PMEP, and the initiation of the SSA for the economically poor

(SSAEP). The projections cover the five largest programs in

terms of number of beneficiaries and expenditure (namely

the SSA, including the SSAEP, scholarships, midday meals,

the safe motherhood program, and the PMEP) and assume

expenditures of all other programs remain at their FY19

level in real terms.44 These simulations consider expected

demographic changes as well as projections related to GDP

growth and inflation (all scenarios assume that benefits are

indexed to projected inflation). Simulations also assume

different government levels have the capacity to efficiently

play their respective functions. Annex 2 provides details on

the assumptions made as well as the methodology used to

estimate the distribution of beneficiaries across quintiles.

Overall, while these scenarios are simple estimations, they

suggest that significant improvements in the impact of social

43 The Youth Employment Transformation Initiative (YETI) project supports the ESCs’ strengthening and the implementation of the PMEP while integrating training elements in the program.

44 These five programs constituted about 94 percent of the total social assistance expenditure in FY19.

32


assistance on poverty and vulnerability can be achieved

with moderate increase in expenditures. Table 3 and Figure 18

summarize the budget required for each proposed change, as

well as that of all these changes combined.

In scenario A, considered the baseline here, we assume that

each program’s eligibility and coverage rates remain the

same, while the benefit amount is indexed to inflation. We

assume that the number of beneficiaries will grow in line with

the population and that the unemployment rate remains the

same. Total expenditure would increase from NPR 83 billion in

2020 to NPR 106 billion in 2025 and NPR 116 billion in 2030.45

45 The estimated FY20 expenditure is NPR 85 billion. The difference of about NPR 2 billion is likely owing to inefficiencies in some of the programs and discrepancies in population estimates across the main data sources: NLFS III and UN population estimates.

46 World Bank projections used for FY20 to FY25; GDP subsequent to FY25 is assumed be at an average of growth rates between FY21 and FY2547 The actual FY20 allocation is NPR 85 billion, about 2.2 percent of GDP. The difference of NPR 2.5 billion between the actual and estimated based on beneficiary figures is

likely owing to inefficiencies in some of the programs and discrepancies in population estimates across the main data sources: NLFS III and UN population estimates.48 Figures in parenthesis represent the total cost of SP including the proposed reform in each scenario. 49 Households with more than three children under the age of 6 have nearly three times the poverty rate (46.6 percent) compared to households with no children (12.3 percent).

As a share of GDP, however, the cost would decline from 2.10

percent in 2020 to 1.67 percent in 2025 and 1.15 percent

in 2030 using the World Bank economic projections, with

relatively high growth rates.46 The nominal increase is driven

by the increase in the number of beneficiaries, particularly

senior citizens, as the population ages. The number of children

is expected to decrease over this period, thereby reducing the

number eligible for child grant and scholarships.

Scenario B seeks to address the inadequate investment

in early years by increasing the child grant from

NPR 400 to NPR 1,000 per month and expanding its

Scenarios (and Key Assumptions)Cost, as % of GDP

Gaps and Expected ImpactFY20 FY25 FY30

A

Baseline: Current programs, constant cover-age rates, and benefits indexed to inflation (changes in costs are linked to projected demographic changes and GDP growth)

2.1047 1.67 1.15

� inadequate investment in children

� Limited coverage of the poor and limited

impact on economic poverty

B

B1: A + child grant increased to NPR 1,000 per month for current beneficiaries

+0.10(2.20)48

+0.05(1.72)

+0.03(1.18)

� Significant impact on child nutrition

� Significant impact on birth registration

� Some impact on poverty as households with

young children are poorer49

B2: A + nationwide child grant at NPR 1,000 per month

+0.75(2.85)

+0.48(2.15)

+0.27(1.42)

C

A + expanded PMEPBenefit of NPR 51,700 per year (100 days of work paid at minimum wage of NPR 517 per day); target population of all unemployed individuals in the bottom two quintiles

+0.24(2.34)

+0.19(1.86)

+0.13(1.28)

� Significant impact on economic/income

povertyAssuming a household size of 4.6, the annual transfer value covers about 58% of the 2010 pov-erty line of NPR 19,261 per person.

D

A + SSAEPBenefit of NPR 2,000 per month; target popu-lation of all households in the bottom quintile, excluding those that receive senior citizen or single women allowance

+0.40(2.50)

+0.29(1.96)

0.18(1.33)

� Significant impact on economic/income

povertyAssuming a household size of 4.6, the annual transfer value covers about 27% of the 2010 pov-erty line of NPR 19,261 per person.

Total: A + nationwide child grant, PMEP, and SSAEP

+1.40(3.50)

+0.96(2.63)

+0.60(1.75)

Table 3: Scenarios, Assumptions, and impacts of Simulated Projections

33


coverage nationwide. increasing the benefit for the current

beneficiaries adds NPR 5 billion to the cost or 0.10 percent

of GDP in FY20 increasing the total to NPR 87 billion in FY20

and NPR 109 billion in 2025. Expanding the coverage of child

grant nationwide at NPR 1,000 per month would increase

spending by 0.48 percent of GDP in FY25 and 0.27 percent

in FY30. This would reach over 2.7 million children under five

across the country.

Scenario C expands the coverage of PMEP to cover all the

unemployed in the bottom two quintiles. In this scenario,

this implies an estimated number of beneficiaries of

Figure 18: Projected Social Assistance Spending under Different Scenarios

370,000 individuals. This is a significant increase from the

current coverage, aimed at 200,000 individuals in FY21. Each

beneficiary is expected to work 100 days in a year. This would

add NPR 9 billion or 0.24 percent of GDP in 2020 but only

about 0.13 percent of GDP by 2030.

Scenario D simulates the rollout of the SSAEP, according

to the 2018 Social Security Act. We simulate a scenario in

which all households in the bottom quintile benefit from

the SSAEP, with benefits of NPR 2,000 per month, excluding

households who already benefit from senior citizen or single

women allowances. This scenario shows that the rollout of the

Note: Percentages nominal and as a share of GDP.

34


SSAEP would increase nominal expenditure by NPR 16 billion,

or about 0.40 percent of GDP in 2020. By 2030, it would only

increase expenditure by 0.18 percent of GDP.

Overall, introducing all these changes would result in

moderate increases in expenditure. in FY20, total social

assistance is estimated to cost 2.10 percent of GDP. introducing all

changes—the expansion of the child grant benefit and coverage

(scenario B2), the expansion of the PMEP (scenario C), and the

introduction of SSAEP (scenario D)—would increase the cost by

1.40 percent of GDP, to about 3.50 percent of GDP in FY20. Even in

this scenario, however, the cost as a share of GDP declines to 2.63

percent of GDP by 2025 and to 1.75 percent of GDP by 2030. This

suggests that the proposed reforms would not present a major

fiscal challenge in the medium term. Note that this simplified

analysis does not consider possible overlaps between beneficiaries

of the PMEP and SSAEP, suggesting the figures overestimate the

actual cost. it also assumes full coverage of the PMEP and SSAEP

and therefore overestimates the cost as large coverage gaps

are likely to remain. Similarly, it does not account for potential

expansion of the SSF, including to the informal sector, which may

shift some of the fiscal burden to the contributory insurance.

Focusing some of the programs on the poorest households

would create significant fiscal space to enable the proposed

changes. One way to create fiscal space for the proposed changes

could be to change the eligibility criteria of some programs, to

ensure they are even more focused on the poorest and most

vulnerable. Here, to illustrate the types of potential savings which

would be achieved, we simulate a fictional scenario whereby

allowances for senior citizens and single women would be

provided only to those in the poorest two quintiles. in such a

case, the total SSA cost would decrease by about NPR 45 billion

(from NPR 68 billion to NPR 23 billion, Figure 19, left panel). The

difference could easily cover an increase in the child grant to

NPR 1,000 per month, as well as its nationwide expansion at that

benefit level. Total cost would still decrease from NPR 68 billion

to NPR 47 billion. Even assuming full coverage of SSA programs

(Figure 19, right side panel), the targeting of senior citizen and

single women allowances would more than finance the expansion

of the child benefit to NPR 1,000 per month for all children. While

targeting benefits would be politically complex and would require

progressive implementation, the analysis serves to illustrate the

possible savings and how these gains can be mobilized to address

existing gaps.

2.6 Summary of Findings and RecommendationsThe Government of Nepal spends a substantial amount on

social protection. Expenditure on SP has grown fivefold over

Figure 19: Cost of SSAs under Various Scenarios, FY20

35


the last 10 years, reaching NPR 134.4 billion or 3.9 percent of

GDP in FY19. This investment in SP has achieved some notable

outcomes, but challenges remain. This chapter identifies eight

key challenges that would need to be addressed to boost the

impact of the SP system on poverty and human development

outcomes.

� The poor are not covered comprehensively or

adequately by the current set of programs. Few

programs explicitly target the poor or aim to reduce

poverty. Less than 40 percent of households in the

poorest quintile are covered by social assistance

programs.50 By design, categorically targeted programs,

such as the senior citizen allowance, reach many non-

poor. For instance, only 31 percent of the beneficiaries

of senior citizen allowance belong to the poorest two

quintiles. The child grant, which is distinctly pro-poor,

currently only covers all Dalit children nationwide and

all children in 25 selected districts (270 local levels),

thereby excluding non-Dalit poor children in other parts

of the country. The PMEP is targeted to the working poor

but is not yet financed at the level required to cover all

those who may be eligible. The proposed transfer to

the economically poor (SSAEP) included in the 2018

Social Security Act is yet to be operationalized. Further,

the identification of the poor and vulnerable remains

unclear, both in terms of policy and implementation,

posing challenges for programs that have an element

of poverty targeting, such as the SSAEP, the health

insurance scheme, and the PMEP.

� In addition, large coverage gaps remain among

those eligible for existing programs, partly due to

implementation challenges. Among the SSAs, coverage

rates are particularly low for the disability grant and the

child grant. Estimates of under-coverage in disability

grant range from 13 percent to 47 percent.51 The senior

citizen allowance and the single women allowance

are found to reach a larger share of the eligible with

estimates ranging from 69 percent to 85 percent.52

� Another area of concern is health shocks, which are

not covered adequately. The risk of catastrophic health

expenditures in Nepal due to an illness or injury is high,

as households bore 55 percent of total health spending

directly out of pocket in FY16. The national health

insurance program is supposed to cover all households

nationwide eventually; however, the coverage remains

low at about 12 percent of the households nationwide.

� Current programs are not designed to be flexible and

scaled up in response to shocks. Programs are designed

to address chronic or static vulnerabilities and cannot

scale up to respond to shocks. Any response to a shock,

like the economic impacts of COViD-19, is complicated by

the absence of databases to identify the most vulnerable,

inability of existing programs to scale up, and absence of

contingent funds linked to these programs.

� Spending on early years and children is limited. Over

50 percent of the social assistance expenditure goes to

the elderly, who make up less than 20 percent of the

total beneficiaries (and considering pensions, the elderly

actually receive about 75 percent of all SP spending). This

is so because of two reasons: first, some of the programs

targeting children do not yet have full geographic

coverage. Second, benefits that go to children are much

smaller than the senior citizen allowances (child grant

benefit is NPR 400 per month compared to senior citizen

allowance which is NPR 3,000 per month). Similarly,

scholarship for girls and Dalits for basic education is

merely NPR 400 per year. These benefits remain low

despite the growing consensus about the need to

invest in early years for human development outcomes.

50 HRVS, a panel survey of 6,000 households in non-metropolitan areas between 2016 and 2018. The survey covered six programs: senior citizens allowance, single women allowance, disability allowance, child grant, safe motherhood program and public works, and earthquake relief and other emergency relief.

51 A 2019 survey of six districts conducted by OPM estimated that 13 percent of those with blue and red disability cards do not receive the allowance. According to the 2016 HRVS, 47 percent of individuals who have a red or a blue card certifying their profound or severe disability (and eligibility for the disability grant) are currently not receiving the grant.

52 The same OPM survey estimated the coverage of senior citizen and single women allowance to be at 85 percent, while HRVS estimated the coverage of senior citizens at 69 percent and single women at 79 percent.

36


Their limited size limits their impact on poverty and the

development of human capital.

� Current programs focus on singular interventions

(cash, training, and so on) and are implemented in

isolation from each other, which limits the sector’s

impact on outcomes. For early years programs,

interventions are not coordinated with each other and

fail to ensure that children receive all the benefits and

services they are eligible for across social protection,

health, and education. Similarly, programs targeted

to the working poor do not address the multiple

constraints that these households face, which limits

their transformational potential. Also, there are currently

no referral mechanisms that would allow individuals

or households to navigate between programs, as their

conditions evolve.

� Current programs do not focus on productive

inclusion. There is a range of livelihood programs in

Nepal, but they are very limited in size and scope and fail

to provide a comprehensive package to address multiple

constraints that poor and vulnerable households face.

Overall, only about 3 percent of the total SP expenditure

is dedicated to labor market programs.

� The lack of coordination at the level of policy making

and implementation has led to some duplications,

particularly in health-related social protection

programs. in the absence of an overarching policy

and institutional framework, programs have emerged

from annual budget speeches over the years in an

ad hoc manner. With few exceptions, these programs

operate independently without policy or operational

links to each other. in addition to limiting duplication,

coordination could also simplify program administration

while ensuring increased coverage.

Although expenditure has been growing sharply, various

simulations suggest there is fiscal room in the medium

term to strengthen the SP system and address some of

these challenges, particularly around coverage gaps and

adequacy of benefits. At current coverage rates and benefit

levels, spending as a share of GDP is expected to decline from

an estimated 2.10 percent in 2020 to 1.67 percent in 2025 and

1.15 percent in 2030. Expanding child benefits to all eligible

with a benefit size of NPR 1,000 grant would increase costs

by 0.75 percent of GDP in 2020 but only 0.27 percent of GDP

by 2030. implementing the PMEP at scale and putting in

place a nationwide SSAEP would add 0.13 percent and 0.18

percent of GDP by 2030, respectively. Overall, combining all

these changes would result in total spending of 3.50 percent

of GDP in 2020, 2.63 percent in 2025, and 1.75 percent in

2030. Substantial fiscal space can also be created by focusing

existing programs on the poorest quintiles: targeting the

senior citizen and single women allowances would more than

finance the expansion of the child grant, for instance.

2.6.1 Recommendations � Clarify broad objectives of social protection and roles

and responsibilities of each level of government,

including establishing coordination and oversight

mechanisms and service delivery standards. The

National social protection framework currently being

drafted could be an entry point for stronger legal and

policy dialogue on an integrated and effective social

protection framework in Nepal. Standards and guidelines

in the design and delivery of social protection programs

by province and local levels would also be necessary to

support coordinated investments in social protection in

the federal context.

� Define institutional arrangements for the sector’s

management. Establishing a designated agency

responsible for implementing the national strategy,

coordinating with sectoral ministries to identify and monitor

necessary reforms in program design, and coordinating

across the levels of government is a priority to move toward

an integrated social protection delivery system.

� Establish an integrated social registry to facilitate

expansion of coverage, integration across relevant

programs, and shock response. A dynamic registry that

captures demographic and socioeconomic data of all

37


households could help identify those eligible for current

programs and identify vulnerable non-beneficiaries who

may need support in times of shock (Ministry of Forests

and Environment 2021). in addition, such a database

could facilitate coordination/integration across programs

on both the demand and supply sides. The registry,

with further investment in administrative systems could

enhance the programs’ outreach to ensure better coverage

of the eligible and better monitoring of programs. The

Government of Nepal has already initiated dialogue and

initial planning to establish the registry. it is also critical, as

underlined by UNiCEF, to continue strengthening the civil

registration system (UNiCEF 2021).

� Raise the impact of social assistance on poverty

by operationalizing the SSAEP and scaling up the

PMEP. The proposed SSAEP and the PMEP are the two

nationwide programs with the potential to support poor

households at scale. Their expansion would address

a critical gap in Nepal’s system and yield significant

poverty gains at a fiscally sustainable cost.

� Increase investment in the early years. This requires

reviewing the benefit amounts of existing programs and

assessment of gaps in available services and programs to

increase access to support for child development in the

early years. increasing the benefit and coverage of the

child grant could be one way to initiate this. Simulations

suggest there is fiscal room to do this with phased

expansion across the country.

� Protect progress in poverty reduction and

investments in human capital by ensuring that

programs are responsive to shocks. This would require

ensuring that (a) key programs such as the PMEP and SSA

are scalable by design; (b) the vulnerable that are likely to

be affected by shocks can be identified, ideally using an

integrated social registry; and (c) contingency funds are

available and can be mobilized through these programs.

� Combine cash with complementary interventions to

focus on human capital in the early years. in addition

to increasing benefits and coverage, the child grant

should be leveraged to facilitate access to information

and training on good practice around early childhood

development. it is also critical to coordinate the various

programs dedicated to early years—safe motherhood,

birth registration, child grant, and ECED—to ensure

every child receives all the benefits s/he is eligible for by

referring beneficiaries between programs.

� Leverage existing programs to design and deliver

an integrated package of services to advance

productive economic inclusion of the poor working

age population. in addition to deploying integrated

programs on a large scale, the Government could also

systematically integrate or link beneficiaries from existing

cash transfer programs or cash-for-work programs with

other services—skills, entrepreneurships, access to

credit, and so on. The ESCs at each local level could be

leveraged toward this.

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39


Social Protection Decentralization: Analysis of Functions, Allocations, and Expenditures

CHAPTER 3.

The first years of transition to a federal state structure in

Nepal have already brought about significant changes

in the way social protection programs are budgeted and

spent. The Constitution of Nepal (2015) divides the power

of state among federal, province, and local levels, with

exclusive and concurrent areas of rights of each level listed

in various annexes. The Nepalese state shifted fundamentally

from the previous unitary state of governance to a federal

one, with the relation between the three levels guided by

the spirit of cooperation, co-existence, and coordination

(Constitution of Nepal, Article 232, Sub-Article 1). in the

previous structure, social protection programs, as with other

programs, were implemented directly by the responsible line

ministries at the central level and their staff at the respective

deconcentrated offices at the district level, which in turn

relied on local bodies and service delivery facilities for budget

expenditure, reporting, and last-mile delivery. in the current

federal structure, local-level governments are responsible for

program implementation and service delivery of both federal

social protection programs and those developed by local-

level governments themselves (except the SSF and public

sector pension).

This chapter aims to analyze the implications of federalism

on SP programming, budgeting, and expenditure, with a

focus on local-level budget allocation and expenditure under

the emerging federation.53 The next section provides an

overview of the constitutional, legal, institutional, and fund

flow provisions as related to the delivery of social protection

functions in the federal context, with a particular focus on

social assistance. The second section analyzes the patterns

in the distribution of budget among local levels. The third

section analyzes the preliminary expenditure data collected

from local levels to review overall and social protection

related expenditure patterns, with a focus on those using

discretionary funds. The chapter concludes with a summary

of the main trends and issues in allocation and expenditure

of social protection programs in federal Nepal and selected

recommendations.

3.1 Social Protection in Federal Nepal: Legal and Institutional Provisions3.1.1 Constitutional Provisions on Allocation of FunctionsThe Constitution of Nepal defines ‘social security

and poverty reduction’ as both exclusive powers of

the federal government and concurrent functions of

the federal, province, and local-level governments in

Nepal (Annexes 5 and 9). An unbundling report, which

elaborates on the functional distribution of powers

between the federal, state, and local governments,

specifies that all three tiers of government may formulate

and implement social protection and poverty reduction-

related programs within their jurisdiction (Table 4) (FiARCC

53 Province-level budget allocation and expenditure are not included in the analysis as relevant data could not be accessed. The local-level allocation and expenditure analysis focuses on FY19 for which full set of data were available.

40


Federal State Local

Social Security: Annex 5 (32), 9 (10) � Social security related national

policies, law, standard, and regulation

� SSF-related national policies, law, fund management. and regulation

� Liaison, coordination, and cooperation with social security-related international agencies and organizations

Social Security: Annex 7 (11 and 21) � Social security-related state policies,

law, standard, and regulation � SSF management and regulation � Liaison, coordination, and

cooperation with social security-related national and provincial agencies and organizations

Social Security: Annex 9 (10) � Social security-related local policies, law,

standard, and regulation � Local plan, program, resource

mobilization, and management for identified and targeted groups

� Liaison, coordination, and cooperation with social security-related national, provincial, and local agencies and organizations

� Social security-related statistics and information management

Management of senior citizens, incapacitated and persons with disabilities: Annex 8 (16)

� implementation of SP programs according to national and provincial standards

Poverty Reduction: Annex 5 (32), An-nex 9 (10)

� Poverty reduction-related national policies, law, standard, and regulation

� Standards for national poverty line and living standards

� Poor household identification-related survey, information management, and regulation

� Poor household identity card management

� Social security and protection-related program (design), implementation, and regulation for identified poor households

Poverty Reduction: Annex 9 (10) � Poverty reduction-related

poverty policies, law, standard, and regulation

� Poor household identification-related provincial survey, information management, and regulation

� Management of social security and protection-related program for identified poor households

Poverty Reduction: Annex 9 (10) � Poverty reduction-related local

policies, law, standard, and regulation

� Poor household identification-related local-level survey, information management, and regulation

� Local social protection planning and management (related to poverty reduction)

Employment and Unemployment As-sistance: Annex 7 (11 and 21)

� Employment creation-related national laws, policies, standards, and regulation

� Labor- and laborer-related social security national policies, laws, standards, and regulation

Employment and Unemployment As-sistance: Annex 7 (11 and 21)

� Employment creation-related provincial laws, policies, standards, and regulation

� Labor- and laborer-related social security provincial policies, laws, standards, and regulation

� Self-employment promotion through entrepreneurship development, training, credit subsidy, and enterprise promotion assistance

Data collection of Unemployed: Annex 8 (17)

� Data collection, processing, and information management of the employed and unemployed

� information management of foreign workers

Table 4: Social Protection Related Excerpts from the Unbundling Report

41


2017). Establishing clear roles and responsibilities and

defining institutional mechanisms to ensure coordination

are key to ensure that concurrent functions or areas

of rights are exercised to mutually supplement and

complement the investments of the various levels

of governments to achieve shared objectives. The

elaborations on social protection and poverty reduction-

related functions in the unbundling report however do

not go far enough in precisely clarifying these roles and

responsibilities, as can be observed in the similarity in the

details presented in the first row of Table 4.

The functional assignments of employment and

unemployment assistance-related programs are also

shared areas of rights between federal and province

governments. As in many federal countries, the federal and

the province governments share the functional areas related

to employment creation and safety nets for workers and the

unemployed. The contributory SSF management as well as

employment creation-related policy functions are shared

between federal and provincial governments. Local levels are

only responsible for collecting data on the employed and the

unemployed within their jurisdiction.

The federal government can formulate national social

protection strategy, policies, and standards to ensure all

state and local-level social protection programs adhere

to the same principles and objectives and contribute to

national social protection goals. Although all three tiers have

concurrent powers to formulate and implement programs within

their jurisdictions, the federal government also has exclusive

legal and regulatory power related to social protection programs.

This is fairly typical of both federal and unitary countries. The

constitution further establishes the supremacy or primacy

of federal law over state or local laws and that of state laws

over local-level policies in cases where they contradict each

other (Articles 57.6, 57.7). The latter two provisions point to

the mandate of the federal government to not only provide

strategic policy guidance to state and local-level governments

for the implementation of federal programs but also to establish

standards that state and local-level governments have to follow

when establishing their own social protection programs.

The devolution of social protection programs remains

an ongoing process. A large number of social protection

programs have been devolved to the local levels; however, the

largest ones continue to be held by the federal government,

including budgets for the SSAs, public sector pensions

schemes, SSF, and the health insurance program. Employment

and labor market-related programs (including the PMEP and

MEDPA) have seen a gradual devolution from the federal level

to provinces and local levels over the past couple of years.

However, the actual delivery of most programs (except the

SSF and public sector pension) has been decentralized to the

local levels. The following section provides a brief overview of

the legal and institutional provisions that guide the transfer

and delivery of program budgets by local levels and of the

main challenges associated with the decentralized delivery

structure. it focuses mostly on social assistance programs, as

social insurance programs remain centralized.

3.1.2 Legal and Institutional Arrangements for Delivery of ProgramsThe Intergovernmental Fiscal Arrangement Act (IGFA Act,

2017) provides the overall legal and procedural framework

for budgeting, transfers, and expenditure of public funds.

The iGFA Act provides for different modalities of transfers of

funds through grants and redistribution of revenue and natural

resources royalties between the three tiers of the government.

The four categories of grants are fiscal equalization grant (FEG),

conditional grants, special grants, and complementary grants.

Allocations of FEG, redistribution of revenue (of collected

excise duties and value added tax), and natural resources

royalty allocation are made using formula-based indicators

as defined by the National Natural Resources and Fiscal

Commission (NNRFC).54 Around 75 percent of the weights

used for the allocation of fiscal equalization and revenue

redistribution consist of population and expenditure needs

and population and area, respectively. Human development

index and socioeconomic indicators represent a smaller share

54 See Annex 4 for the framework and indicators used for FEGs and revenue redistribution. The redistribution of natural resources royalties follows different formulas based on the natural resource type.

42


in both of the frameworks. Special and complementary grants

are demand-based transfer modalities whereby federal and

provincial governments can fund specific activities at the

implementing level. Conditional grants, according to iGFA Act,

Article 9, are provided by the federal government to provincial

or local-level governments, and from province to local levels,

for the implementation of federal, provincial, or local-level plans

and programs on the basis of the recommendations of the

NNRFC. The NNRFC prepares annual recommendations on the

principles, basis, and use of conditional grants for both federal

and provincial levels, which are supposed to be followed by

the respective line ministries. As many of the devolved sectoral

programs (including social assistance programs in health and

education) continue to be federally funded, the allocation of

the budget for these programs is still under the responsibility of

the line agencies at the federal level.

The Local Government Operations Act, 2017, provides

the legal framework related to the functions of the local-

level governments including procedures for local-level

planning, budgeting, and implementation of programs.

The act specifies that the local level shall be responsible for the

implementation and management of SP programs under federal

and state laws (Article 11.2.a) and also allows the option for local

levels to formulate policies, laws, and standards for designing

and implementing local-level social protection plans and

programs for identified and targeted groups (Article 11.4.f). The

act further specifies that local governments should formulate

and implement periodic, annual, strategic, and sectoral medium-

and long-term development plans (Article 24.1) while ensuring

that they align with the policies, objectives, goals, timelines, and

procedures of the federal and state governments (Article 24.2).

The act also identifies several principles to help prioritize local-

level plans including poverty reduction and benefiting women,

children, and marginalized classes; regions; and communities

(Article 24.3.a, f). The act however does not specify the

mechanism for federal and provincial governments to monitor

compliance of local-level governments in terms of program

standards and guidelines.55 This suggests that individual program

guidelines themselves need to have provisions for monitoring and

oversight of program implementation at the local level.56

Most of the national social assistance programs are funded

through conditional grants and payment authorizations (SSA

program). The SSA program funds are provided to local levels

as payment authorization against the federal treasury, as was

the practice during the pre-federalism period. While the iGFA Act

did not include provision for transfer of funds between different

levels of government outside the four grants-based funding

and revenue-sharing modalities, the 2019 Financial Procedures

and Fiscal Accountability Act allows ministries or agencies to

authorize expenditure to another ‘office’, in cases where more

than one office has to spend the allocated amount. This act, by

including province and local-level government offices under the

definition of ‘office’ provides the legal basis for intergovernmental

payment authorization as a modality of fund transfer between the

levels of government. As will also be discussed in the section on

expenditures, this modality represents a large share of local-level

social assistance expenditures.

As discussed earlier, there is no integrated framework or

standards to guide coordinated programming and delivery

of programs by different levels of government. While various

acts provide the legislative frameworks for specific programs, no

singular policy framework or strategy exists to define and guide

the overall social protection objectives of the government. Thus,

there is no framework which regulates how different levels can

contribute to shared national objectives and how the sector is

organized to ensure coordination across different levels. Absence

of an overarching sectoral policy framework has also meant that

social assistance programming has been mainly led by federal

budget, with little space for subnational governments. it will be

critical to ensure that the National Social Protection Framework,

currently under preparation, lays out these foundations.57

55 The Federal, Province and Local Level (Coordination and Interrelations) Act, 2020, provides further guidance on managing intergovernmental relations, but the regulations for the act are still pending.

56 A Monitoring and Evaluation Bill has been submitted to the National Assembly to establish the legal framework of monitoring and evaluation mandates and principles for all three levels of government. However, the bill primarily focuses on the implementation of plans and development programs, with limited focus on service delivery.

57 The National Planning Commission (NPC) has approved a draft version of the National Social Protection Framework, as of the drafting of this chapter, and is being reviewed before being submitted to the cabinet for final adoption.

43


Social protection could be regarded as a government function that is best suited to be a function of national or central governments because of “nation-wide equity and goals and because of externalities that can render decentralized management economically inefficient” (Matsuda 2017). While the majority of countries with federal or quasi-federal structures aligning with this view provide this mandate to federal governments, some countries like india, South Africa, Argentina, and Brazil have assigned social protection as a shared responsibility between federal and state/province or local governments. However, in spite of differences in functional assignments, federal governments are seen to account for the largest share of social protection expenditure in most countries. Even when federal governments generally play the dominant policy-making and financing role, local-level governments in most cases are responsible for the delivery of services and benefits (Matsuda 2017).

Different patterns of central and local-level roles and responsibilities are observed in the delivery of social protection (Figure 20). Nepal’s current institutional framework for the main social protection programs aligns more with the ‘central administration with partial delegation of responsibilities’ model, in which the administrative tasks are delegated to the local levels with the planning and financing of benefits and administrative costs remaining with the federal level. As Nepal adopts its national framework, the allocation of responsibilities may evolve.

Concurrency of functions raises the issue of duplication of efforts, a challenge that is exacerbated in contexts that are highly decentralized and have significant fragmentation of social protection programs. As responses to coordination challenges resulting from concurrency and fragmentation, some countries like Argentina

Box 5: Delivering Social Protection in Federal Contexts - Lessons from international Experience

Source: Matsuda 2017, 16.

Figure 20: Typology for Division of Roles and Responsibilities in Social Protection

Decentralized Administration with Federal Oversight

Complete Local Autonomy

Centralized Administration

Central Administration with Partial Delegation of Responsibilities

Centralized

Local

44


and South Africa have taken measures to recentralize some social protection functions away from subnational levels, while others have adopted policy instruments to ensure coordination and effective implementation.

Centralization as a Response to Concurrencyin South Africa, the federal government recentralized its social protection policy (in particular, the block social grants system) to create a federal agency to administer all social assistance grants in 2004. This was primarily driven by institutional and capacity problems at the province and local levels, including corruption and service delivery failures. Argentina has tried to recentralize both its pensions as well as social assistance programs away from subnational authorities. The Argentinian federal government attempted, with limited success, to centralize the pension system to bring coherence and equity (in terms of eligibility criteria and benefits) and also due to fiscal considerations of provincial governments in the 1990s (Matsuda 2017). The universal child allowance (Asignación Universal por Hijo, AUH), a child grants program with extensive coverage, replaced a public works program (Jefes and Jefas, PJJHD) and a CCT program (Programa Familias, PF) after issues related to political capture by subnational government and to intergovernmental coordination in the delivery of programs. The AUH is completely centralized, without province or local-level involvement, and is administered through the centralized national social security system (Administración Nacional de la Seguridad Social, ANSES). Lack of coordination across three levels of government arising from governance and fund flow structures that provide political and fiscal incentives to not cooperate constitute the key policy challenges in Argentina. These factors continue to affect the delivery of social protection in the country even after attempts to recentralize social protection

functions. Even in these examples of recentralization, implementation is often a mix of delivery by a central administrative body and delivery through partial delegation to subnational levels.

Supporting Institutional Coordination through Integration in Policy, Program, and Delivery Systemin contrast to Argentina and South Africa, experience from Brazil points to possibilities of ensuring coordination in the delivery of social protection by institutionalizing clear roles and responsibilities and use of innovative policy instruments. Social protection in Brazil is a shared responsibility between provincial and local governments, with local governments enjoying considerable autonomy from states and federal authorities. The 1993 Organic Law of Social Assistance established the roles and responsibilities of the three levels of government and the basis for the Unified System of Social Assistance (SUAS), the platform for intergovernmental coordination. The SUAS is operationalized through two further federal mechanisms including the single registry (Cadastro Unico) and the index of decentralized management (iGD). The first mainstreams the processes of entry into various programs. Providing a single gateway into multiple programs is also a way to avoid duplication. iGD is used to estimate the transfer of resources (linked to the quality of local operations, including the performance and use of the single registry system). Bolsa Familia, the largest CCT program in the country, was formed by consolidating several pre-existing cash transfer programs to reduce the inefficiencies resulting from repeated administrative procedures. The program uses the national single registry to enroll beneficiaries. Municipalities sign memoranda of understanding with the federal government and are responsible for running social assistance reference centers, a single window which

45


provides information and supports enrolment into a wide range of programs. Brazil, thus, provides an interesting example of improving coordination in the delivery of social protection through greater clarity in roles and responsibilities, consolidation of programs, use of integrated systems, and institutional arrangements that encourage local-level service providers to adopt and use the systems, in a decentralized implementation environment with strong federal oversight.

Many countries following Brazil’s experience have increasingly turned to integrated information and delivery systems to improve coordination and efficiency in social protection in decentralized structures. indonesia and Kenya are more recent examples of countries that have started building a single registry system following different modalities. inefficiencies resulting from the fragmentation of federal programs also cause duplication in efforts at the point of service delivery, which like in Nepal are the local-level governments in many cases. international experiences in integration of delivery processes, along with the use of integrated registries

and single-window delivery points for multiple programs, provide potential solutions to such service delivery issues in decentralized and federal contexts.

Lessons for Nepal � Policy and legal framework to clarify roles and

responsibilities and also longer-term vision for the social protection sector are essential to coordinate delivery in a decentralized structure. Many of the countries mentioned have strong legislative or sectoral policies that have guided efforts to improve coordination and efficiency in program delivery.

� Addressing human and fiscal capacity constraints at the subnational level and strengthening federal oversight mechanisms are a key priority for transitioning to a completely decentralized administration model.

� Reducing fragmentation of existing programs and use of integrated systems are key to address challenges related to concurrency and duplication in the federal context.

Program guidelines and implementation manuals provide

local levels with the procedures and standards for the

delivery of services and benefits. Local levels rely on program

guidelines provided by federal line ministries to plan and

deliver services and benefits. The organizational structure

of local levels includes specific personnel designated as

focal persons for each sector/function.58 Health coordinator,

education officer or resource person, and civil registration and

SSA focal persons are responsible for ensuring coordination

and communication between the service delivery facilities

58 Please refer to Annex 11 for generalized organogram of local levels and personnel and institutions responsible for the delivery of specific programs and services.

and the local-level executive office. The delivery of the services

following the standards and procedures is the responsibility of

personnel at the respective facilities (birthing center, schools,

and ward offices). Ward committees (including chairperson and

members) constitute the lowest level of elected representatives

in the federal structure and have some oversight authority

over education and health facilities in the respective wards.

However, actual monitoring is often limited due to low capacity

and knowledge of program-specific guidelines.

46


Overall, Nepal’s context and international experiences

both suggest that the federal level needs to continue to

play critical functions. These include functions related to

policy, standard setting, programming, and financing. They

also include functions of support to the local levels aimed

at strengthening their capacity to implement national as

well as local programs. in Nepal, the federal government

is responsible for the planning, budgeting, and financing

of key programs (see next section) and finances key local-

level personnel responsible for their delivery. Although

the concurrency of social protection functions allows for

subnational levels of government to design and implement

their own programs, the amounts they can dedicate to social

protection will depend on their relative capacities (both

physical and fiscal) as well as development needs in other

sectors. Given the relatively recent transition to a federal

structure and weak local capacities, it might be advisable

for critical social protection functions to remain under the

federal level, while capacity is built to support subnational-

level programming and while national programs are further

improved to address geographic and social inequities.

3.2 Allocation of Social Protection Program Budget3.2.1 Overall Allocation between Levels of GovernmentThe federal government continues to manage the biggest

portion (around 80 percent) of the total national annual

budget, including all sectors.59 The budget transferred to

the local levels has been increasing over the years, whereas

Figure 21: Total Budget Allocation and intergovernmental Transfers from the Federal Level

Source: MOF, Red Books, Various Years

(a) Total Budget Allocations (b) Intergovernmenal Transfers

59 This section focuses on budget allocation by the federal government; hence, own-source revenues (and starting balances in provinces and local-level consolidated funds) are not included (they would be included in their own budgets).

47


that for provinces has decreased in the current FY (Figure 21).

The amounts of the special and matching grants have also

been consistently low (around NPR 5 billion per year each

for provinces and local levels). And while conditional grants

have been decreasing for provinces, they have consistently

increased for the local levels.60 FEGs and revenue sharing

constitute the majority of local-level discretionary funds and

have remained consistently around NPR 150 billion.

Similarly, for social protection, the majority of the budget

is managed at the federal level. The social protection budget,

measured according to the functional classification, has grown

over the past years, although limited devolution of funds to

province and local levels has been observed (Table 5).61 Compared

to other human development sectors, social protection is the least

decentralized in terms of budget (Figure 22). This partly reflects

the fact that the SSA program budget is still under the federal

60 Provinces and local levels also receive funds from the redistribution of revenue and natural resources royalties. Provinces also provide revenue redistribution and grants to local levels that are not captured in the figures above, which are based on centrally prepared federal and subnational red books.

61 The analysis uses the functional classification, as the red books do not report using economic classification (see Box 1 for a description of these classifications and their differences). Functional categorization of SP includes mostly social assistance program budget. Data from the Federal Red Book for FY19, FY20, and FY21.

FY19 FY20 FY21

NPR, millions Share of Total (%) NPR, millions Share of Total (%) NPR, millions Share of Total (%)

Federal 45,857 97.7 71,000 99.5 92,274 94.4

Province 232 0.5 5 0.0 56 0.1

Local level 824 1.8 381 0.5 5,455 5.6

Table 5: Social Protection Federal Budget Allocation (to All Levels, Functional Classification)

Source: MOF, Red Book, Various Years.Note: includes all federally financed expenditure (does not include discretionary budgeting at the subnational levels).

Source: MOF, Red Book, Various Years.Note: includes all federally financed expenditure (does not include discretionary budgeting at the subnational levels).

Figure 22: Decentralization of Federal Budget in Human Development Sectors

48


government. if public pensions were included, the share of the

federal government would be even higher.

The remainder of this section provides an overview of the

distribution of the budget for four main SP programs (SSA,

scholarship, midday meal, and safe motherhood) across

the 753 local levels to illustrate the equity and efficiency

dimensions of the allocations in FY19.62 Equity in this context

is understood as the alignment of the allocated budget to the

differences in geographic and poverty characteristics of the

local levels. Efficiency is understood as the responsiveness of

the budget allocation to the needs of the local level and its

relationship with the expected program outcomes.

3.2.2 Equity in the Allocation of Budget for Key Social Assistance ProgramsThe distributions of population as well as poverty profiles of

households in Nepal are uneven across ecological areas, rural

and urban areas, and provinces. Local levels in mountain areas

constitute a small proportion of the total population but present

high monetary poverty rates (around 40 percent of households

are below the poverty line, see Figure 23). Monetary poverty

also decreases with urbanization, with metropolitan and sub-

metropolitan municipalities displaying lower poverty incidence

(note that urban local levels formed after federalism are largely

constituted of rural areas, with higher poverty rates). Overall, the

incidence of poverty is not significantly correlated with the local

level’s population size: the relationship between poverty incidence

and population only captures a small proportion of the variations

observed (Figure 24). So, while poverty rates are on average higher

in rural areas, there are significant variations in poverty between

rural areas with comparably low population. This has important

implications for the distribution of social protection programs.

Multidimensional poverty rates in Province 2 and Karnali Province

are higher than monetary poverty rates, suggesting that a significant

share of households are not income or consumption poor but may

be deprived along the dimensions of health, education, or living

standards. The gap may be even more severe as monetary poverty

rates are estimated to have fallen further since the 2010 survey

although COViD-19 is likely to have reversed some these gains. 63

62 The budget for the four programs was around NPR 45 billion in FY19, approximately 81 percent of the total social assistance budget and 33 percent of total SP budget. All but the midday meal program are nationally implemented until FY20 (see section 2.1.3). Midday meal program has also been expanded across the country in FY21.

63 Although no official poverty estimates have been prepared since 2011 (national poverty rate estimated at 25 percent, but World Bank staff estimates based on the AHS put the national poverty rate around 20 percent in 2014/15).

64 The provincial Monetary Poverty and MPI HCRs are from NPC (2018), based on 2010/11 NLSS and 2014 Multiple Indicator Cluster Survey (MICS). The Monetary Poverty HCRs for ecological zones and local-level types are based on World Bank staff calculations, using NLSS 2010/11. Population estimates have been derived from the 2010/11 census.

Figure 23: Distribution of Population across Areas and Poverty Headcount Ratios (HCRs)64

Source: NPC , World Bank

Monetary Poverty HCRMultidimensional Poverty Index (MPI) HCR

Mou

ntai

n

Ecological Zone Province Local Level Type

Bagm

ati21

Tera

i

Hill

Rura

lM

unic

ipal

ity

Urb

anM

unic

ipal

ity

Sub-

met

ropo

litan

Met

ropo

litan

Gand

aki

Lum

bini

Karn

ali

Sudu

r Pa

shch

im

Percentage of Population

49


Allocations for selected social assistance programs

(scholarships, midday meal, and safe motherhood)

are relatively well aligned with poverty, but important

inequities remain. Local levels in mountain areas have

higher combined per capita budget allocation, which

matches their higher poverty prevalence (Figure 25). This

partly reflects a combination of small populations, explicit

geographic targeting of some programs (midday meal),

and higher levels of benefits (safe motherhood program)

in mountain areas. Per capita scholarship budget is lowest

in Terai regions, whereas that for midday meals is lowest in

hilly areas. The safe motherhood program budget provides

different rates for Terai, hill, and mountain regions (NPR 1,000,

NPR 2,000, and NPR 3,000, respectively), though these are

not reflected in the per capita allocation. While the areas’

demographic profiles and availability of facilities might

Source: World Bank

Figure 24: Population and Poverty HCRs of Local Levels

Source: MOF, NPC, World Bank

Figure 25: Per Capita FY19 Program Budget for Three Federally Financed Programs

Mou

ntai

n

Ecological Zone Province Local Level Type

Bagm

ati21

Tera

i

Hill

Rura

lM

unic

ipal

ity

Urb

anM

unic

ipal

ity

Sub-

met

ropo

litan

Met

ropo

litan

National

Gand

aki

Lum

bini

Karn

ali

Sudu

r Pa

shch

im

Multidimensional Poverty Index (MPI) HCRScholarship Midday Meal Safe Motherhood Monetary Poverty HCR

50


explain some of these differences, the low allocation for areas

with high population is particularly concerning. Focusing on

provinces, total per capita program allocation in Province 2 (in

the Terai region) is just above half of that for Karnali Province

which has comparable MPi HCR but one-third the population

of Province 2. And analysis by local-level type suggests an

overall correlation but also remaining inequities. The safe

motherhood program provides much larger benefits per

capita in metropolitan cities and the smallest benefits in sub-

metropolitan cities.

The per capita allocations for the SSA program are lower

for sub-metropolitan and metropolitan cities and for

local levels in the Terai region, particularly Province 2.

in Province 2, the average per capita allocation per local

level is around NPR 925, significantly lower than the national

average of NPR 1,529 (Figure 26). Differences in the share of

eligible demographic categories across areas are unlikely to

be significant, suggesting low per capita allocations most

likely reflecting under-coverage of individuals who are

eligible in some areas. Under-coverage could result from

many factors, including difficulties in accessing services and

lack of identification documents. Under-coverage might

also explain small per capita allocation in metropolitan and

sub-metropolitan cities, when programs rely on a permanent

residence to register people, limiting access to internal

migrant population groups. Overall, UNiCEF reports per capita

allocations ranging from NPR 1,596 in Bagmati to NPR 2,659

in Gandaki, with Province 2 and Karnali Province having high

MPi but low per capita allocation, while Gandaki Province

displays the lowest MPi and receives the highest per capita

SSA (UNiCEF 2021).65

Overall, local-level poverty rates explain little of the

variations in per capita budget allocations for most

programs, except for scholarships. The scatter plots (Annex

4) of per capita budget for SSA, safe motherhood, and midday

meal programs show little correlation with local-level poverty

profiles (statistically insignificant or relatively low correlation

coefficient as in the midday meal program, as reflected in

Table 6). However, a strong correlation is observed for the per

capita scholarship budget.

Figure 26: Per Capita FY19 SSA Budget by Geography

Source: MOHA, NPC, World Bank

65 UNICEF 2021.

Mou

ntai

n

Local Level Type

Bagm

ati21

Tera

i

Hill

Rura

lM

unic

ipal

ity

Urb

anM

unic

ipal

ity

Sub-

met

ropo

litan

Met

ropo

litan

National

Gand

aki

Lum

bini

Karn

ali

Sudu

r Pa

shch

im

Multidimensional Poverty Index (MPI) HCR Monetary Poverty HCRSSA

Ecological Zone Province

51


The differences observed between programs derive

both from design and the process followed to allocate

the program budget. The SSA program by design targets

beneficiaries categorically, and most categories remain

relatively equally distributed across poverty groups, as

also discussed in Chapter 2. The allocation for the safe

motherhood program is based on a budget ceiling (informed

by the previous year’s budget) and local levels’ population and

geography. Supply-side factors, in particular the availability

of health facilities, can be expected to play a determining

role in the uptake in different local levels and could explain

more of the differences in allocation than poverty levels.

Allocations for education-related programs are based on

the actual number of students recorded in the EMiS, and the

high correlation with poverty could be linked to the higher

number of public-school students in the local levels with

higher poverty rates.67

3.2.3 Efficiency Perspectives in Program Budget AllocationThe concept of allocative efficiency is generally used to

characterize the overall budget in terms of its capacity “to

distribute resources on the basis of the government’s priorities and

the program’s effectiveness” (Schick 2001). This section applies this

framework to the distribution of the SP budget among the local

levels. Allocation for scholarship and midday meals programs, for

example, would be considered more efficient if more budget per

capita were allocated to the local levels with lower enrolment and

graduation rates, and which in turn translated into year-on-year

improvement in these indicators for those local levels. 68

The responsiveness of per capita budget to the local-level

needs appears negative for most health and education-

related social protection programs.69 The FY19 per capita

budget for the safe motherhood program, designed to

incentivize delivery at the health facility and adoption of

antenatal and postnatal care visits, is positively correlated

with the rate of institutional births in the preceding fiscal

year (significant at 5 percent significance level). This shows

that local levels with higher institutional delivery rates were

on average allocated more per capita resources. This partly

reflects the cumulative effect of the program, as well as the

greater presence of health facilities in these local levels.

However, this also points to an inefficient budgeting process

that favors better ‘performing’ local levels instead of investing

more in areas where institutional delivery rates are lower. The

correlation between net enrolment rates (for girls and overall)

and per capita scholarship is similarly positive and statistically

significant. This suggests that on average, the local levels

with higher enrolment rates were allocated higher per capita

scholarship budget. The per capita allocation for the midday

meal, however, did not have a statistically significant correlation

with net enrolment rates.

There is limited evidence of a correlation between the

scholarships and midday meals program budget and the

performance of students and schools. As discussed in Chapter

2, the impact of scholarships on attendance and retention, and

by extension on graduation, has been limited by the small size of

the benefits for basic-level schools. The negative and statistically

significant correlation of per capita scholarship budget with

Table 6: Correlation between per Capita Program Budget and Poverty HCR66

Per Capita SSA Per Capita Safe Motherhood Per Capita Scholarship Per Capita Midday Meal

Poverty HCR −0.0562 −0.0649 0.5597* 0.1335*

66 An asterisk signals statistical significance at 5 percent significance level in Tables 4 and 5.67 The correlation coefficient between the proportion of students in public schools out of the total number of students and poverty rates in local levels is found to be

positive and statistically significant at 1 percent significance level. 68 This analysis does not include SSA, since the program does not have specific objectives or outcomes. SSA’s responsiveness to needs would thus be related to program

coverage, discussed earlier. The analysis of outcomes for safe motherhood programs is not included, for lack of access to the HMIS data for FY19.69 See Annexes 6 and 7 for scatter plots of program budget and relevant indicators.

52


graduation rates of basic-level students, both girls and overall

(Table 7), also confirms this observation and points to limited

program effectiveness. The correlation with per capita midday

meal budget was observed to be statistically insignificant using

the entire country. However, since the program is not nationally

implemented, outcomes were compared for recipient and

non-recipient local levels: recipient local levels had on average

higher net enrolment ratios than non-recipients (5.0 percentage

points and 5.7 percentage points, respectively, for overall and

girl students, both statistically significant, with no significant

differences observed in graduation rates). Figure 27 focuses on

changes in these indicators over time (rather than levels) and

shows that recipient local levels performed better across most

indicators than non-recipients, although differences were small

and statistically insignificant.

3.3 Social Protection Expenditure at the Local LevelDisaggregated data on program-specific expenditures

for each local level are not available, and the limited

availability and quality of budgetary and expenditure

data limit the analysis. While the budget allocation for each

program funded at the local level is provided on a program

activity level, expenditure is reported along economic and

functional categories. This makes it difficult to analyze program-

wise expenditure patterns among the local levels. Also, each

Institutional De-livery Rate FY18

Net Enrolment Rate Girls FY18

Net Enrolment Rate Total FY18

Graduation Rate Girls FY19

Graduation Rate Total FY19

Per capita safe motherhood 0.5723a

Per capita scholarship 0.153a 0.1635a −0.2162a −0.2023a

Per capita midday meal −0.0128 −0.0184 0.0117 0.0387

Source: Authors estimate based on MOF and MOEST data

Table 7: Link between the Social Protection Budget and Health and Education Outcomes

Figure 27: Changes in Education indicators by Receipt of Midday Meal Program (FY18–FY19)

Source: Authors estimate based on MOEST data.

53


local level is expected to prepare an annual plan and budget,

which includes programs funded through both conditional

grants and other discretionary sources, using the prescribed

digitized Public Financial Management (PFM) system

(Subnational Treasury Regulatory Application [SuTRA]). While

many local levels have started using the system, timeliness

and quality remain an issue.70 To prepare annual consolidated

financial reports including provinces and local levels, the Office

of the Auditor General therefore complements information

available in SuTRA with information collected manually

through the district treasury offices.

3.3.1 Overall Expenditure at Local LevelsThe overall expenditure reported by local levels increased

in the first two years of fiscal federalism. Using data on

activities financed by both earmarked and discretionary

sources, expenditures by local levels across all sectors increased

between FY18 and FY19, with a significant increase in the

conditional grant amount (Figure 28). This partly reflects the

progressive inclusion of federally authorized expenditures,

including those for the SSA program, in local-level expenditure

reports in FY19.71 Funds from internal sources also increased,

due to the inclusion of revenue redistribution from federal

and provincial governments in FY19. Part of the increase

also reflects the fact that provincial governments started

transferring more resources to local levels, though they are still

a small share of total expenditures.

On average, local levels execute a significant share of overall

allocated budget, despite capacity constraints. Federal

conditional and equalization grants, local revenue, and federal

authorization were the top sources of expenditure in FY19 (Table

8). The average budget execution rate for local levels in FY19

was around 80 percent (down from 84 percent in FY18). The

execution rate for conditional grants (which finance most health

and education-related social protection programs) was particularly

high, around 90 percent. Execution rates were lower for own

sources and funds received from provincial governments.72

Figure 28: Overall Local-Level Expenditure by Source

Source: MOF

70 The collection of budget details by the Financial Comptroller General Office (FCGO) for FY20 was delayed and included only summary information on various sources of funds. In a circular issued by the FCGO on October 1, 2020, 550 local levels had used SuTRA to approve their annual budget for FY21, while only 19 had prepared and submitted annual financial reports for FY20 using the system.

71 Because reported expenditures are categorized by functional and economic headings, as mentioned earlier, the analysis of expenditure does not align with the analysis of budget presented earlier by program.

72 Unaccounted/unspent conditional grants are deducted from the following year’s FEG amount.

54


3.3.2 Local-Level Expenditures on Social Protection74

Turning to social protection itself, the share of local-

level expenditures increased for social security and

general public services categories. Using the functional

classification, while the average share of health and

education sector spending in local-level expenditure

decreased in FY19, the share of social protection

expenditure increased (Figure 29)75 This is primarily

73 Adapted from Government of Nepal (2019, 23–24).74 There are issues around the quality of data and lack of clarity around reporting of funds from payment authorizations. While the reporting for conditional grant-funded

programs would follow the broad provisions in the annual appropriation bill, the rules regarding those funded through payment authorization by federal or provincial government remain unclear. Indeed, around NPR 23 billion of SSA expenditure were reported by local levels in FY19, significantly less than the actual expenditure of SSA of around NPR 39 billion. Significant variations in the understanding of the rules by the federal and local levels could lead to both underreporting and double reporting of such expenditures under both federal and local level consolidated reports.

75 The actual amounts spent for health and education were reduced by NPR 4 billion and NPR 2 billion, respectively.

SourceReceipt (NPR,

billions)Expenditure

(NPR, billions)Share of Total

Expenditure (%)Expenditure

Ratio (%)

Government of Nepal (Authorization) 54 42 13.6 77.7

Province Government (Authorization) 1 1 0.2 98.8

Nepal Government Conditional Grant 121 109 35.7 90.7

Nepal Government Equalization Grant 85 73 23.8 85.4

Nepal Government Complementary Grant 3 2 0.6 67.6

Nepal Government Special Grant 2 2 0.6 108.5

Province Government Conditional Grant 9 6 1.8 61.2

Province Government Equalization Grant 4 3 0.9 62.6

Province Government Complementary Grant 2 1 0.2 37.3

Province Government Special Grant 1 0 0.1 51.0

Local Government (Balance/internal Source/Revenue Sharing) 101 68 22.3 67.5

OVERALL 383 306 80.1

Table 8: Summary of Local-Level Transfers and Expenditures by Source FY1973

Figure 29: Local-Level Expenditures by Function

Source: MOF

55


due to the inclusion of federal government-authorized

expenditures in FY19 discussed earlier.

Between FY18 and FY19, the inclusion of government-

authorized expenditures sharply increased the total

local-level SP expenditure, though discretionary spending

also increased. Discretionary sources of funds include

internal sources and equalization grants from the federal

and provincial governments. Earmarked sources include

conditional, complementary, and special grants as well as

payment authorization expenditures from both the federal

and provincial governments.76 The proportion of discretionary

expenditures in total social protection is seen to have

decreased from 57 percent to about 7 percent between the

two years, primarily led by the inclusion of federally authorized

expenditures (Figure 30). in nominal terms, discretionary

expenditures in social protection actually increased from

around NPR 1.7 billion to NPR 2 billion between the two years.77

Conditional grant-funded SP expenditure was around NPR 1.6

billion in FY19, which is almost twice as large as the allocated

amount reported in the FY19 federal budget. This may be due

to the addition of conditional grants-funded activities midyear

or may point to serious issues in data quality.

Local levels spent a limited share of their discretionary

budgets on social protection, with the exception of

metropolitan cities. Overall, local levels spend about 9

percent of their total budget on social protection (Figure 30),

which is more than the share of social protection in the total

federal government spending (around 3.8 percent). However,

most of these are from earmarked sources, and on average,

local levels spend only 1–2 percent of their discretionary

budget on social protection. Metropolitan cities, however,

spent a higher share (6 percent) of their discretionary budget

on social protection, perhaps to address the rural bias in

program allocations discussed earlier (Annex 8).

Figure 30: SP Expenditure Disaggregation by Source FY18 and FY19

(a) FY18 Total SP Expenditure : NPR 2 billion (b) FY19 Total SP Expenditure : NPR 29 billion

Source: MOF

76 Provincial government-funded SP expenditures represent a very small share of total expenditure.77 Across all sectors, discretionary sources represent around 48 percent of the local-level expenditures but a very small share for social protection.

56


More generally, on average, local levels do not allocate

significant discretionary resources to the human

development sectors. Human development represents on

average 59 percent of all local-level earmarked funds but

only 2.2 percent of the discretionary funds (for an average

of 31 percent of total resources; see Figure 31). Within

human development spending by local levels, education

spending dominates and represents 18 percent of the total

local spending (35 percent of total earmarked spending).

Discretionary funds are barely used for health, education,

and social protection (representing 0.5 percent, 0.4 percent,

and 1.3 percent of the total discretionary funds, respectively).

incentivizing better as well as more investments by the local

levels would be key in fully leveraging the opportunities

provided by federalism in the country.

3.4 Summary of Findings and RecommendationsRoles and Functions

� The concurrency of functions, fragmented program

landscape, and lack of policy provisions and standards

are key challenges in the delivery of social protection

in federal Nepal. The concurrency of social protection

functions has increased the need to improve coordination

between agencies at the federal level, as well as with

provinces and local levels and to clearly define roles and

responsibilities. The fragmentation of social protection

programs further poses a major challenge to ensuring

efficiency and quality of service delivery at the local level.

Limited monitoring and evaluation of service delivery

standards for both the federal and local levels is also

an issue. international experience points to the risk of

political tensions between different levels of government

and recentralization of functions. An integrated policy

framework and strong delivery systems are important

to improve coherence, coordination, monitoring, and

oversight.

Recommendations

y Develop and adopt an integrated policy framework that

defines long-term sectoral objectives to guide the choice

Source: MOFNote: ‘Earmarked’ expenditure includes those activities funded through payment authorization and conditional and complementary grants from the federal and provincial levels. ‘Discretionary’ expenditure includes those funded from internal revenue, federal and provincial revenue sharing sources, and federal and provincial equalization grants.

Figure 31: Share of Human Development (HD) Sectors in Earmarked and Discretionary Local-Level Expenditures, FY19

57


and design of programs (as discussed in Chapter 2),

establishes roles and responsibilities of the three levels

of government, establishes coordination and oversight

mechanisms, and defines service delivery standards.

y Develop institutional mechanisms for the federal level

to play a coordinating and supporting role in planning,

design, and implementation of social protection roles at

the province and local levels to ensure alignment with

national development objectives and particular needs of

the province and local levels.

y invest in integrated delivery and information systems

to improve coordination and efficiency in program

implementation and monitoring. Establish mechanisms

to support capacity at the local level to adopt and use

such systems for the implementation and monitoring of

national programs.

Allocation of Social Protection Budget

� The federal government continues to hold the largest

portion of the total SP budget. The decentralization

of social protection budget is not at par with that in

other human development sectors. This could reflect

the ongoing policy debate around the allocations of

functions and funds in the context of concurrent rights

and also perhaps concerns related to the adequacy of the

fiscal accountability mechanisms and the capacity of the

local levels to manage the large SSA program. Continued

centralization of the SP budget is not a problem in itself,

as global experiences also suggest advantages to the

federal-level funding and managing to ensure equitable

access to a core set of programs. However, it is important

to ensure that the SP budget allocations by the federal

government align with these goals, and institutional

arrangements and systems are established to ensure

local service delivery follows the national standards and

guidelines.

� Per capita allocations for social protection programs

on average are not fully aligned with equity and

poverty reduction goals and furthermore are

not responsive to the needs of the local levels.

A multivariate analysis of different factors affecting

per capita budget allocation for the four main social

assistance programs (SSA, safe motherhood, scholarship,

and midday meal) highlights the limited correlation

with poverty and the negative correlation with more

urban local levels and those in the Terai region (Annex

7). Part of this variation might be linked to significant

under-coverage in urban areas and the Terai. The design

of the programs and budget allocation processes

both contribute to inequity in the allocation of the SP

budget and limit the impact SP investments can have on

achieving their objectives.

Recommendations

y Systematically review and revise the design and

budgeting processes for key national programs so that

they play a more explicit role in reducing poverty and

addressing geographic inequities. This would require

a sectoral policy framework that defines the scope

and objectives of social assistance programs, clear

institutional roles and responsibilities, and a defined

timeline for the implementation of the identified reforms

in improving the allocation of programs.

Social Protection Expenditure at the Local Level

� Lack of program-level expenditure data along with

poor quality of reported data pose major challenges

to analyzing social protection expenditures. Local-

level expenditure data do not provide program-level

information, and manual collection in many local levels

can affect the quality of data. The lack of local capacity

to fulfill basic accounting and financial management

functions potentially contributes to data limitations.

Variations in reporting requirements for programs funded

through different modalities also affect the consistency

and completeness of data across the local levels.

� Local-level discretionary expenditures in human

development sectors, including social protection,

remain low on average. Human development sector

expenditures (health, education, and social protection)

constitute around 32 percent of the total local-level

expenditures, but the majority were funded through

58


earmarked sources. Similarly, social protection

represented around 9 percent of the total local-level

expenditures, mostly from earmarked sources or

payment authorizations. Only 1.3 percent of all local-level

discretionary sources were used for social protection,

though metropolitan cities spend an average of 6

percent.

Recommendations

y invest in strengthening integrated physical and financial

progress reporting systems to allow better tracking

of program expenditures. This needs to be supported

by the establishment of clear rules on the reporting

of expenditures of social assistance programs funded

through various modalities and sources, including by

streamlining budgetary and expenditure codes.

y incentivize investments by the local level in social

protection, and human development in general, to

leverage the opportunities provided by federalism to

achieve national goals. One way to achieve the latter

would be by defining clear rules, standards, and processes

in federal program guidelines for the provincial and local

levels to add or top off benefits. incentive mechanisms

could also be built into the allocation framework for

intergovernmental transfers that reward the local levels

spending more of their discretionary funds in the health,

education, and social assistance sectors.

59


60


61


Planning and Budgeting for Social Protection - Analysis of Processes and Challenges

CHAPTER 4.

Figure 32: Locations of Local Levels Visited by the Field Research Team

78 The chapter focuses on SSAs, school scholarships, safe motherhood program, and midday meals. It does not focus on civil servant pensions or on the PMEP whose budget allocation process was evolving at the time of this analysis.

79 The qualitative field survey was conducted with purposive sampling, to cover at least one local level in each province and focused on the local levels included in the Federalism Capacity Needs Assessment Survey. Seven rural local levels were selected, based on population, area, and reports of additional SP programming. Two metropolitan cities and a sub-metropolitan city were selected in Province 2, Lumbini Province, and Gandaki Province. A team led by Gyanu Sharma, Mamata Pokharel, Mahima Poudel, and Roshan Sedhai led the field work and prepared the background paper upon which this chapter is based.

Federalization brought about significant changes in the

processes by which budget is allocated, transferred, and

spent. While the main social protection programs continue

to be funded by the federal government, the implementation

has largely been devolved to local levels and to a lesser

extent to provinces. The flow of fund and implementation

modalities of these national programs have also changed in

the new federal context. Furthermore, the provinces and local

levels are increasingly adding programs, whether as top-

ups to national ones or as separate interventions, targeted

to vulnerable groups within their jurisdiction. The new

institutional context, together with variations in the priorities

and capacities of the three tiers of governments, adds

complexity to the planning, budgeting and implementation

processes for social protection programs.

This chapter provides an overview of the planning,

budgeting, and fund flow processes for key social

protection programs at the federal, province, and local

levels.78 The findings are based on document review and in-

depth interviews conducted at the federal ministries of health

and education, provincial ministries in Province 2 and Gandaki

Province, and 10 local levels spread through the country (map

of the field sites shown in Figure 32).79

4.1 Processes at the Federal Level4.1.1 Planning and BudgetingThe budgeting process for all major social protection

programs is centralized, that is, all allocation decisions are

made at the federal level. Most programs are legacy programs

from the pre-federalism context and continue to be funded

through sectoral programs under specific line ministries, for

example, Home Affairs, Health and Education. Some of these

programs have been devolved to local levels, with funds

62


80 Starting in FY21, the PMEP will transition from being centrally funded to funding through conditional grants.81 Safe motherhood program is also delivered through district and regional hospitals under provinces. Provinces receive the funds for the program through federal

conditional grants (in FY20, around 25 percent of the program’s budget was transferred to the provincial level and 75 percent to the local levels). 82 CERID (2017) claims that the number of basic-level students in EMIS was lower than that in school registers and that the number present in the classrooms was even

lower, suggesting absenteeism or inflated school registers. The National Planning Commission (2012) had found that scholarship budgets were often higher than required because schools inflated numbers.

transferred as conditional grants, while the budget for others

remains with their respective federal agencies. Although the

fund flow, implementation, and reporting processes for these

two categories differ significantly, the allocation of funds is

still done centrally by the relevant line ministries.

The annual budgeting cycle at the federal level

follows the provisions in the Financial Procedures and

Fiscal Accountability Act, 2020 (Annex 9). The MOF, in

coordination with the NPC, initiates the budget preparation

cycle in January by preparing estimates of total income and

budget ceilings for each federal line ministry and for different

transfers to the province and local levels. Based on the ceilings

received for fiscal equalization and revenue redistribution,

the NNRFC prepares recommendations for allocation of these

funds to the provinces and local levels. The line ministries

then allocate program-specific budgets (including for

conditional grant-funded activities) after mid-February. The

notification of the allocated budget is then provided to local

levels when the annual budget is approved in the parliament

in early June. This leaves little time for the local governments

to incorporate these activities into their annual work plan and

finalize the budget, which often leads to delays.

The SSA program continues to rely on the processes of

planning, budgeting, and fund-flow similar to that used

pre-federalism. The DONiDCR, under the MOHA, is responsible

for the management and administration of the program. The

SSA planning and budgeting processes are aligned with the

annual application and enrolment period, as prescribed by

the program guidelines. Since the transition to federalism, the

department has mandated the entry of beneficiary information

by the local levels into its MiS as a prerequisite for the allocation

of the program budget. The budgeting process is based on

MiS data entered by the local levels and the standard transfer

amount for each category of beneficiary. To date, it does not

include provisions for management or implementation costs.

DONiDCR, through the MOHA, then requests the budget to

the MOF and NPC. Each local level is informed of the budget

allocated at the beginning of each fiscal year. Any changes

to the allocation during the fiscal year have to be made by

updating the MiS and requesting additional funds.

The majority of the other social protection programs

are budgeted and transferred to the local and province

levels as part of larger programs, as conditional grants.

This category includes the safe motherhood program, school

scholarship, midday meals, and so on.80 These programs

are components of broader sectoral programs in health

and education, and the respective federal line ministries

are responsible for budget allocation. With primary health

services and education up to secondary level devolved to the

local level, the budget for education and primary health-

related programs has also been devolved to the local levels.81

Procedures followed by the line ministries in establishing

conditional grants—which areas to cover and by

which budget amount—vary significantly, resulting in

inefficiencies. The NNRFC prepares an annual document to

guide conditional grants allocation, but it does not provide

clear rules and procedures. Sectoral line ministries use their

MiS, with inputs from the local levels to allocate resources, so

data timeliness and quality issues can lead to allocations that

are not aligned with the local needs. The sectoral ministries

visited during the study did not have standard ministry-level

guidelines for the allocation process, relying on institutional

knowledge and pre-federalism practices. For the school

scholarship and midday meals programs under the School

Sector Development Project (SSDP), the MOEST’s Center

for Education and Human Resources Development initiates

the budgeting applying unit costs to the number of eligible

students in the education MiS (EMiS). While data quality has

been improving, the quality and accuracy of student data

have been a point of concern.82 For the safe motherhood

63


program, the MOHP defines the program budget considering

the ceiling received from the MOF, the activities that are

devolved, and the population and geography of each area

to estimate the amounts for each local level. The health MiS

(HMiS) is often not used in the process, because it does not

capture beneficiary-level details of the safe motherhood

program and because of delays in data entry, which can lead

to inefficient allocations.83

4.1.2 Fund FlowConditional grants are released to the provincial and local

levels consolidated funds on a quarterly basis. After the

first installment is deposited at the beginning of the fiscal

year, the release of subsequent installments is conditional

upon the submission of expenditure reports for the previous

quarter. Furthermore, any changes to the amount allocated

in the conditional grant breakdown need to be approved by

the federal ministry, and additional amounts are provided as

payment authorization (not as additional conditional grants).

While conditional grants are directly transferred through

intergovernmental transfers, programs which remain under

the federal budget, like the SSA, need to release payment

authorization for each local level to receive the funds through

the District Treasury Controller Office (DTCO) office, for every

installment. Clearance of the previous installment is required

for the release of additional installment of payments for this

modality as well.

4.1.3 Monitoring and ReportingFinancial reporting of federally budgeted and conditional

grant-funded programs differs in their timing and

procedures. For budgets received for conditional grant-

funded program, local levels report to the DTCO on a

quarterly and annual basis. The relevant sectoral ministries

at the federal level receive the financial report only after the

annual reporting for the fiscal year is completed. For programs

funded through payment authorization, the ministry can

receive the payment reports through the FCGO, but no

standardized or automated process was observed for the SSA

program.

The processes of budgeting and reporting use different

categorizations, which constrain improvements in

monitoring. For funds transferred as conditional grants,

the financial reports submitted by the local levels are

presented using economic and functional categories for each

expenditure. However, expenditures are not linked to specific

programs or activities (as they are during the allocation

process). Rather, expenditures from all programs and sectors

are lumped together in the economic or functional categories.

Overall, as underlined by UNiCEF (2021), the systematic

codification of social protection allocations and expenditure

is critical to provide the information required for sectoral

planning and monitoring.

Program MISs support physical progress reporting,

but this reporting is not linked to financial progress

reporting. The SSA MiS is used to measure physical

progress, manage beneficiary database, and track bank-

based transfers (it does not record manual payments).

Similarly, the EMiS and the HMiS capture details on

scholarship recipients and the number of institutional

births. But none of these systems can be reconciled with

the financial reports submitted by the local levels for

expenditures.

4.2 Processes at the Provincial LevelProvince-level governments share the concurrent

function to deliver social protection programs, and

few have initiated new programs in their constituency.

Karnali Province and Province 2 have initiated programs to

encourage investment in girls’ education and discourage

early marriage.84 Karnali Province has also announced a Chief

Minister Employment Program similar to the federal PMEP,

with guidelines aligned closely with the federal ones but with

limited coordination.85 Some provinces, like Gandaki, have

83 Based on an interview conducted with officials at the Ministry of Health and Population, and MOHP (2018).84 The ‘Bank account for daughter, protection for life’ program provides transfers to girls, under the condition that they remain unmarried and have completed secondary

school by the time they turn 20; the ‘Save daughters, educate daughters’ program provides girl students with bicycles and education funds and provides information on gender-based violence.

85 Based on a conversation at the federal MOLESS.

64


also started investing in elderly care homes and services.

Some provinces have reportedly shown interest in providing

programs such as the Beti Bachao Beti Padao Program

(UNiCEF 2021).

Low institutional capacity and limited legal and policy

frameworks affect the functionality of the provincial level

governments.86 While the federal and local levels continue to

perform relatively similar functions of program administration

and service delivery as in the pre-federal context, the role of

provincial governments as a new level of government remains

unclear and underdeveloped. Many province-level policies

need to align with and follow federal ones. However, delays

in the formulation of many policies (including in education

and health) restrict province-level governments’ ability to

establish their jurisdiction and the institutional capacity and

processes to fulfill their functions. Representatives of Gandaki

Province’s Ministry of Social Development, for instance, cite

the lack of clarity on policy and guidelines on the jurisdiction

of province governments, relationship between local and

province governments, limited resources, and low capacity

as key constraints. There also appears to be some lack of

clarity on allocating some functions across province-level

institutions themselves.87

4.2.1 Planning and BudgetingProvince-level planning and budgeting processes

remain unclear, varying with political leadership and

its relationship with the province-level bureaucracy. For

example, the Ministry of Social Development is required

to prepare annual plans and budget, based on guidelines

from the provincial planning commission and under the

supervision of the provincial MOF. But at the time of field

visits, Gandaki Province and Province 2 did not have a

functioning planning commission in place and had not

prepared periodic plans. At times, this allowed for greater

political influence in the selection and budgeting of programs

and for frictions to emerge between the bureaucracy and the

political leadership.88

4.2.2 Fund Flow and ImplementationProvincial governments are responsible for

implementing some decentralized federal programs,

funded through conditional grants. The social

protection programs transferred to provinces include the

microenterprise development and poverty alleviation

(MEDPA) program, people’s residence program, higher

education scholarship for disabled students, and parts

of the safe motherhood program (as discussed earlier).

However, lack of capacity and clarity on guidelines on fund

flow arrangements has led to issues in the delivery of the

program through hospitals.89

“There is actually very little work for us to do. Our roles and responsibilities remain to be defined. The government isn’t paying enough attention in institutionalizing and strengthening the directorate. More importantly, the existing laws and regulations make it extremely difficult to function on our own. The local bodies are in charge of schools, while the center occupying other policy level and monitoring works. Local bodies do not cooperate when we go for inspection and monitoring. They say they are autonomous, thus free to do everything. And they are not entirely wrong. The government should clearly demarcate boundaries of our works.”

Education Directorate, Ministry of Social Development, Province 2

86 The observations in this section are based on interviews conducted in Province 2 and Gandaki Province.87 For example, although the province Ministry of Social Development should be responsible for health, education, and social development and protection, the Chief

Minister’s Employment Program in Karnali and the ‘Save Daughters, Educate Daughters’ program in Province 2 are based in the offices of the province chief ministers.88 Gandaki Province displayed a more comprehensive planning and budgeting process: line agencies and divisions were asked to submit a list of plans and programs

within the given budget ceiling, in consultation with stakeholders including members of the planning commission, members of political parties, civil society organizations, and nongovernmental organizations (NGOs).

89 https://kathmandupost.com/health/2019/03/19/pregnant-and-new-mothers-deprived-of-government-announced-incentives.

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Provincial governments also transfer resources to

the local levels (conditional and fiscal equalization

grants) and directly to service delivery facilities,

resulting in overlapping accountability and

coordination challenges.90 Although primary health

services and schools up to the secondary level are under

the jurisdiction of local levels, the concurrency of these

functions in the constitution provides some gray areas. For

example, provinces receive federal funds under the SSDP,

although the program is implemented by the local level.

Observations from the field suggest issues in coordinating

activities between the province and local levels are leading

some province governments to transfer funds directly

to facilities, bypassing the local levels. in both provinces

visited, province-level governments were directly investing

in facilities managed by the local levels, mostly in the

form of infrastructure development, outside of the local

planning process. Some local levels were not even aware

of the investments made by the provinces in the facilities

under their jurisdiction.

4.2.3 Monitoring and ReportingMonitoring and reporting functions and capacity vary

between provinces and are affected by lack of clarity on

jurisdiction between the province and local levels.91 The

provincial ministries directly monitor and supervise facilities

and institutions under their purview, such as hospitals,

technical training centers, or district offices. But financial

reporting remains problematic, for instance, with facilities

observed to not have submitted reports from the previous

year at the time of the field visit. The lack of reporting by the

provincial government on grants received from the federal

government in the previous fiscal year resulted in the federal

treasury not releasing the intergovernmental transfers for

the following fiscal year. As a result, salaries were not being

paid well into the first quarter and expenditures for some

programs were stalled (such as the safe motherhood program

in regional hospitals). Finally, while provinces are supposed to

monitor schools and health facilities and do receive funding

for this through conditional grants, the role of provinces

has been questioned as going against the spirit of the

Constitution, thereby curtailing their ability to monitor.

4.3 Processes at the Local LevelThe local levels play a critical role in the delivery of the

national social protection program and have started

allocating some of their discretionary budget to the sector.

Local levels have the mandate of implementing programs

financed by a mix of earmarked funds (including conditional

grants and releases through payment authorization) and

their discretionary funds (including from FEGs, revenue

redistribution, royalty form natural resources, and own-source

or internal revenues), although use of discretionary sources

remains limited, as discussed in Chapter 3.

4.3.1 Planning and BudgetingLocal levels are expected to follow a standard planning

and budgeting process to prepare annual budgets and

work plans for both earmarked and discretionary funds.

The process starts after receiving the budget ceiling for FEGs

and revenue sharing from the federal and provincial levels

and the projection of internal revenue collection from the

Revenue Advisory Committee. Ward committees and sectoral

committees then prioritize projects and activities and submit

their proposal to the local-level Budget and Program Planning

Committee. After consultations, the committee formulates

their draft annual budget and program, which also includes

estimates of activities funded by conditional grants. The

local-level executive office is then responsible for approving

the budget and submitting to the local assembly for approval

(Figure 33 and Annex 9).

In practice, these processes are not uniformly followed.

Anecdotal evidence suggests that the sequence of activities

is not uniformly followed, for example, budget ceilings do not

always precede project selections at the ward and sectoral

levels. Additional programming in social protection (and

health and education) were observed to primarily come from

90 More on fund flow to service delivery facilities in the following section on local levels.91 Provinces also receive fiscal equalization and conditional grants following similar processes, as described in the section on local levels. Some of the issues related to the

transfer and reporting processes also apply to provinces.

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67


the mayor/chairperson or chief administrative officer rather

than through sectoral or ward-level consultations. There also

seems to be some variation in understanding whether SSA

funds, part of the federal budget, need to be included in the

local-level plan.

Activities funded by conditional grants at times may

require additional local funding, which can result in

delays in the finalization of local budgets. Local levels

only receive conditional grant allocations in early June, long

after the local planning process has started (Annex 9). As

described earlier, conditional grants are not always aligned

with local needs and at times require the local levels to

allocate additional resources to ensure service delivery. This

gives the executive office a short period of around two weeks

to include conditional grant-funded activities in its budget

and fill any gaps from discretionary sources, which can cause

delays in the finalization of local budgets.

Low capacity constrains the use of evidence-based

approaches to design and plan new programs. Only

three out of the ten local levels visited had prepared a

profile of their jurisdiction, based on data on households

and facilities, and only Bannigadhi-Jayagadh was using it

for planning purposes. The lack of usability of the MiSs, as

well as limited understanding of how such data could be

used, restrict their use in the planning process. As a result,

additional programming is often made without inputs from

sectoral staff and without an explicit focus on a specific

outcome (see example of Butwal’s top-up to senior citizen

allowance in Box 6). The limited capacity to analyze, plan, and

design at the local level makes central guidance/support for

program design and use of data critical to ensure local-level

investments in social protection have sustained impact and

contribute to national development goals.

Additional social protection programming through local-

level discretionary funds is usually top-ups or additions

to existing programs. Observations in the local levels visited

suggest that the local levels show some interest in improving

the coverage and quality of social protection services. Table

9 suggests that most investments were attached to existing

programs either in the form of increased amounts (top-

ups) or in the form of additional in-kind benefits: Butwal

and Pokhara topped up the senior citizen allowances, and

others had added incentives to improve maternal and child

care like free ambulance services, cash top-ups, in-kind

transfers for antenatal visits, or care package for new mothers.

Additional scholarships, targeted to disadvantaged and poor

communities and to higher education, were also observed

in some local levels, although most programs seem to focus

on elderly and pregnant or lactating mothers. The local levels

also funded daycare centers, senior citizen recognition and

celebration events, and elderly care homes.

Municipality Province Additional Programs, Benefits, and Services

Helambu Rural Municipality (RM)

Bagmati (3)

� increase in safe-motherhood travel allowance

� Free ambulance service for pregnant women

� Higher education scholarship to students from discretionary fund

Chichila RM 1

� Additional allowance for the elderly above 80 years

� Stipend for postnatal care (PNC) home visits by health post workers

� Health worker allowance for PNC visits

Butwal Metropolitan Lumbini (5)

� Door-to-door health checkups for the elderly

� Additional Dashain allowance for senior citizens (NPR 2,000)

� Medicine pack for new mothers

� Ward-level scholarship program

Table 9: Additional Programs for Social Protection at Selected Local Levels

68


Finally, the local-level planning and budgeting process

often has limited participation of, or focus on, poor and

marginalized communities, at times even creating barriers

for the vulnerable to access services. Federalism can only

lead to a more inclusive and equitable society if planning

processes are inclusive and prioritize programs for the poor and

vulnerable. in the pre-federal context, local bodies like the Village

Development Committees allocated some resources for groups

such as the Dalits, women, or the disabled. in most local levels

visited, this practice of allocating resources and the community-

and ward-level consultations does not seem to have been carried

over. in areas where marginalized groups were more organized,

their concerns had a much better chance of being addressed. For

example, in Bannigadhi-Jayagadh, the local Dalit network had a

meeting with the ward leadership to propose programs for the

upcoming year. At the other extreme, some local levels added

barriers for some of the most vulnerable to access services. For

instance, Badhaiyatal made it mandatory for individuals to have

a ‘toilet card’ that certifies they have built a toilet, before they

can receive SSA benefits, which likely affects the most poor and

landless, who may not be able to comply.

4.3.2 Fund Flow and ImplementationDecentralization of program delivery functions has

resulted in significant changes in fund flow and

implementation arrangements (Annex 10). in the federal

context, although line ministries decide on allocations for

programs funded by conditional grants, the funds themselves

are directly transferred to local-level consolidated funds

(through district treasury controller offices). Service delivery

facilities, previously managed through the district-level offices

of federal ministries, are now directly under the local levels.

Municipality Province Additional Programs, Benefits, and Services

Durga Bhagawati RM 2 � Bicycles for girl students of Grades 9 and 10

� Houses built for the endangered Dom community

Birgunj Metropolitan 2 � Midday meals to students up to Grade 5

� LPG distribution in freed bonded laborers in ‘kamaiyaa’ community

Bannigadhi Jayagadh RM Sudurpaschim (7)

� Ward scholarships

� Skill-building program for single women and Dalit community

� Allowance for HiV positive individuals

� Meeting allowance for mothers’ group meetings

� Birth registration allowance

Badhaiyataal RM Lumbini (5)

� Nutrition grant for new mothers

� Midday meals to ECD center children

� Municipality-level scholarships

� Monthly allowance and bicycles for female community health volunteers (FCHVs)

Pokhara Metropolitan Gandaki (4) � 10% increase in elderly allowance

� ‘Safe mother, safe child’ program

Kathekhola RM Gandaki (4)

� Additional NPR 1,500 grant for new mothers from local levels

� Egg distribution as an incentive for pregnant women for their PNC visits

� Midday meals to ECD center children

Chaukune RM Karnali (6)

� Basket of items for new mothers from the local level, including mosquito nets,

under Deputy Chair’s Safe Motherhood program

� Midday meals from the local level

69


All local levels visited explained that, as they gained experience, they were becoming more efficient in planning and budgeting. But this is a slow process, which can result in inefficiencies or disruptions in services.

A challenge in nearly all local levels visited was the lack of data, as well as underutilization of existing data, to plan or measure progress. Bannigadhi-Jayagadh in Sudurpaschim Province was the only local level which had created a statistical profile of its area—with data on demographics, development indicators, and facilities. And none of the local levels visited had a multiyear plan or development indicator targets. Lack of data and technical planning can jeopardize programs, as illustrated by two examples:

� in Butwal, a program was approved the previous fiscal year to distribute a holiday allowance of NPR 2,000 to all senior citizens over 70 years. Our interviews showed that the program was approved on the basis of estimates, rather than actual data, leading to assumptions that the

final cost would be ‘about 25–30 lakhs’. The program eventually cost more than eight times that amount and had to be discontinued. if they had used the MiS, planners would have had an accurate estimate of the number of eligible senior citizens, realized it was not affordable, and designed a more realistic program.

� in the rural local level of Chichila, 30–40 percent of the local-level discretionary budget for the ongoing fiscal year was allocated for education. The previous chief administrative officer championed education, and the local level agreed to celebrate the fiscal year as Education Year. The local level consulted with head teachers of schools to identify needs. As a result, new teachers were hired. Their salaries amounted to 30 percent of the local level’s discretionary budget. The following fiscal year, the local level wanted to invest in health, but their ability to do so was limited since a significant share of discretionary funds had de facto been pre-committed for years (to continue paying teachers recruited earlier).

Box 6: Limited Analysis Can Result in Unsustainable Programming

The funds that local levels receive from provincial and

federal governments follow different timelines, creating

complexity and increasing the workload of local levels

(Figure 34). For intergovernmental grants, the MOF directly

releases the first installment a month into the beginning

of the new FY. FEGs are then released on a quarterly basis

(after submission of the expenditure report to the DTCO). For

conditional grants, a first tranche is released, representing

one-third of the allocated amount. The remaining amounts

are released on the basis of expenditure reporting, using a

timeline different from that of the equalization grants. Funds

transferred through a payment authorization are channeled

through the DTCO on a quadrimestral basis (for the SSA).

Subsequent releases are contingent upon submission of

payment reports from the previous installment. Revenue

redistribution is calculated at the beginning of the FY on the

recommendation of the NNRFC and subsequently released

into local-level consolidated funds on a monthly basis. Since

local levels typically use a combination of these sources to

finance social protection services, the differences in timelines

represent an administrative burden for the local levels to

deliver services.

Increased mandates of local levels for service delivery

have not been matched by increased institutional

capacity and human resources. Federalism makes local

70


Fig

ure

34:

inte

rgov

ernm

enta

l Fun

d Fl

ow M

echa

nism

s

71


levels responsible for managing multiple programs, services,

and facilities previously managed by district-level offices

of sectoral ministries.92 Schools, health facilities, and ward

offices, along with other technical service centers, are now

managed by local-level offices.93 However, local delivery

capacity is constrained by lack of technical staff, clarity on

roles, and performance management (Box 7) (World Bank

and UNDP 2019). For example, disruptions in the delivery of

disability identification cards, required to enroll in the SSA

program, were observed in most local levels visited. Similarly,

the introduction of an online civil registration system

generated confusion among ward secretaries in some local

levels, which led to some Dalit children being excluded from

child grant. Both human resources and institutional capacity

constraints were seen to be the main sources of service

delivery disruptions in these cases.

Service delivery is affected by the multiplicity of modalities

for transferring funds to points of service. Social protection

programs vary in the frequency and timing of services

or transfers: scholarships are provided once a year, at the

beginning of the school year; midday meals are provided

throughout the school year; safe motherhood benefits are

provided at four antenatal care visits and after birth; and

SSAs are provided every four months. The regularity of these

transfers is critical to the effectiveness of social protection

programs, as they provide beneficiaries with a reliable source

of income. in practice, there can be variations in the timing of

92 See Annex 9 for diagrammatic representation of the changes in institutional and fund flow arrangements. 93 See Annex 11 for mapping of institutional arrangement for service delivery at the local levels.

Source: Nepal Administrative Staff College and Georgia State University. 2019, viii-ix.

The Federal Capacity Needs Assessment (FCNA) survey, implemented to better understand the state of operations and finances and the capacity of sub-federal governments, identified a number of capacity gaps. Both provincial and local governments generally have the basic capacity to ‘keep the lights on’, which is commendable given that some of those government units were recently created. However, when it comes to the quality of local management, a number of critical elements were missing in many jurisdictions. Five such areas emerge in the survey: (a) medium-term planning, (b) clear roles and responsibilities of individual staff, (c) procurement, (c) managing performance of organizational units and individuals, and (e) gender equality and social inclusion.

in terms of human resources, seconded staff fill less than half of the positions in local government offices. More positions are filled by contractual

staff and those carried over from pre-existing local government bodies. However, the latter tend to be either general public administration or support staff. As a result, many high-skill technical positions, such as engineers, lawyers, and accountants, remain vacant.

About half of the local governments have written job descriptions for all positions in their organizational structure, and only about 15 percent of non-metropolitan local cities do not have written job descriptions for any positions. Less than one-third of the local governments report having their own laws/policies for managing their staff, in terms of leave approval, performance appraisal, reporting rules, and so on. More than two-thirds of the local governments follow staff performance review mechanisms, while less than one-fifth never do. However, over 40 percent of the local levels never practice sanctions for underperformance.

Box 7: Excerpts from ‘Nepal: Capacity Needs Assessment for the Transition to Federalism’ Report

72


SSA payments, due to delays in the release of the payment by

the federal ministry. The Government’s decision to transition

to electronic bank-based payments for SSA, however, promises

improvements in the timely delivery and further encourages

government-to-people (G2P) transfer systems in other

programs (Box 8). For programs funded by conditional grants,

issues in timing of service can arise because of local-level

inefficiencies.94 For the safe motherhood program, variations

in the modality of fund flow between the local level and the

health facility seemed to affect program implementation.95

Standardization of fund flow modality between the local level

and facilities is necessary for a more efficient and reliable

delivery of programs.

Service delivery facilities, schools in particular, receive

funds from multiple sources directly, resulting in unclear

94 While funds for scholarships are often transferred to schools upon request, there was variation in the implementation of midday meals in the local levels visited. In Helambu, the school visited had received funding for midday meals but had not started the program, in the absence of guidelines on implementation. In Durga Bhagawati, the local level had not released funds to the schools, even toward the end of the year.

95 Three modalities were observed: (a) advance payment to facility, with periodic reporting/reconciliation by facility; (b) facilities covering expenses from their own resources, then being reimbursed by local levels; and (c) facilities registering new mothers after birth and requesting funds on the basis of actual deliveries, resulting in delayed receipt of benefits by mothers.

Box 8: Progress in Payment Systems

Nepal has made significant progress on digitization of payments for social assistance, supported by the expansion of bank branches across the country. improving access to finance and electronic payment of G2P transfers is a priority of the Government, as stated in the 15th Five-Year Plan.

Building on a pilot program implemented in 2014 in three districts, as of January 2021, more than half of the local levels now use banks to deliver SSAs (386 out of 753 local levels). For social protection, the Government is requiring all local levels to transition to payment of SSA via banks within FY22.

The electronic payment of SSA is guided by a national ePayment strategy which enables each local level to contract banks to deliver SSA in compliance with prescribed conditions (including opening zero balance accounts and home delivery of cash or provision of nominees for beneficiaries over the age of 90 or those with full disability). An MiS-generated list of beneficiaries is provided to the contracted banks. Every four months, the local levels provide a lump-sum equivalent to the total benefit amounts to the banks, which then deposit

allowances into individual accounts.

The digitization of beneficiary lists and the transition to electronic payment have helped remove duplicates and ghost beneficiaries and improved the timeliness of delivery. While the digitization of payment has improved efficiency, some operational challenges remain. These include last-mile delivery where some beneficiaries must travel long distances to reach the bank, as well as real-time reconciliation of payments in the program information system.

The PMEP is another large program which makes payments into beneficiary bank accounts in most local levels.

Public and private investments in electronic payment systems (such as the planned integrated national payment platform and the development of mobile money infrastructure) will further strengthen G2P transfer systems. Lessons from the SSA and the PMEP’s adoption of digital electronic payments will help shape payment systems in the future for a broader set of programs.

73


Gra

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( Con

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Sp

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Fund

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Fig

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35:

Fun

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Ser

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Del

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74


accountability structures. As mentioned earlier, some

facilities receive funds from sources other than local-level

budgets (Figure 35). in addition to federal and provincial

programs, NGOs and donors also support schools and

health facilities directly.96 While most of this additional

support focuses on infrastructure, it should be included in

local budgets and coordinated by the local levels to ensure

allocative efficiency and accountability.

Most individuals report increased ownership or

connection with local-level services, although some

grievances remain on the quality of services and facilities.

The expectations regarding the local levels are high, though

after three years, they may be waning in some parts. Some,

like those living in remote rural local levels like Chichila,

report satisfaction with no longer having to go to the

district for every transaction. Dalits in Bannigadhi, senior

citizens in Durga Bhagawati, and visually impaired women in

Badhaiyatal reported feeling more connected to their wards

and local-level offices. Focus groups participants reported

having a greater say on matters of public importance, due

to their ability to participate in public audit and hearings on

budgets and individual projects. This is in line with the local

levels’ efforts to expand the space for civic engagement for

Dalits, community leaders, the elderly, and women’s networks.

4.3.3 Monitoring and ReportingThe presence of elected representatives has improved

the monitoring of facilities and service delivery. Most of

the local levels visited showed increased engagement and

monitoring by elected leaders. in some cases, biometric

attendance monitor had been installed to monitor

teacher and health staff attendants, leading to decrease in

absenteeism. SSA delivery in wards were also facilitated by

ward committee members, found to be more responsive to

beneficiaries’ needs. Although instances of conflict between

ward committees and school and health facility management

committees were observed, service delivery was not affected.

96 Federal programs like MP Constituency Development Fund and some district-level offices of the federal education ministry were observed to directly invest in facilities. Province-level examples were provided in the previous section.

Reporting from service delivery facilities to local-level

offices was observed to be mostly manual and paper based

and to vary in frequency and processes. A combination of

monthly, quarterly, and ad hoc reporting appears to be the

practice in many local levels. Reporting on SSAs follows a more

defined timeline, as wards are required to clear the advance

payment received from the local levels in a specified timeline

after payments (when those are manual). Reporting on bank-

based transfers of SSA is usually done directly to the local-level

office after the bank made the deposits. However, almost all

reporting from schools and health facilities to the local levels

was observed to be paper based and manual, creating a heavy

burden for the local levels with limited staff to compile and

prepare local-level reports.

Timelines for reporting of expenditures also vary for

different funding sources. The Annual Federal Appropriation

Act makes it mandatory for the local levels to submit

expenditure reports for fiscal equalization and conditional

grants to receive subsequent installments. But the timing for

reporting differs, following the fund flow timing described

earlier. Programs funded through payment authorization

follow yet a different timeline for reporting through the

DTCO. Finally, any unaccounted or unspent conditional grant

amount is to be deducted from the following year’s FEG

amount. These different processes create inefficiencies and a

heavy administrative burden for the local levels.

Reporting on physical implementation is done through

multiple information systems and limited by low capacity.

HMiS, EMiS, and the SSA MiS need to be regularly updated

to allow federal sectoral ministries to monitor progress in

the delivery of the programs and plan for the following fiscal

year. in most local levels visited, human resource capacity

(a combination of the limited number of staff and the low

capacity of existing staff) severely affected the quality and

timeliness of reporting.

75


4.4 Summary of Findings and RecommendationsPlanning and Budgeting

� Planning and budgeting processes for the main

national social assistance programs is to a large

extent similar to those in the pre-federal context,

although fund flow and reporting mechanisms have

changed for most. Sectoral federal ministries continue

to be responsible for allocating budgets for their

programs, which have been devolved to the local levels

and funded through conditional grants. Budget for the

SSA program remains with the MOHA at the federal level

and is transferred as payment authorizations. The budget

for SSA can be revised relatively easily midyear, based on

updates in the program MiS by the local levels, while that

for conditional grant-funded programs is relatively more

difficult to revise.

� Reliance on weak information systems and limited

data and limited participation of the local levels

contribute to inefficiencies in program budget

allocations. Sectoral MiSs used for program budget

allocations are at different levels of development and

face issues in terms of timeliness and quality of data,

resulting in allocations that are not fully aligned with

the needs of the local levels. Moreover, the participation

of the local levels in the budgeting process is limited to

updating the sectoral information systems, limiting the

ability of the budgeting process to respond to the local

needs. The sectoral ministries visited during the study

also did not have standard ministry-level guidelines

for the allocation process and relied on institutional

knowledge and pre-federalism practices.

� Limited local capacity to use evidence to plan and

budget for locally funded programs constrains their

effectiveness and sustainability. Anecdotal evidence

suggests that additional social assistance programming

by the local level was decided with limited inputs from

sectoral staff and limited use of information. This had led

in some cases to local levels canceling their programs

after a while, due to lack of funding. The lack of guidance

and support for the development of subnational

programs led to ineffective program selection and

design. Observations from the field also revealed

variations in the degree of participation of poor and

vulnerable groups in the planning process.

� Lack of a harmonized planning processes across

federal, provincial, and local levels can result in

delays and disruptions. For instance, local levels only

receive conditional grant allocations in early June, long

after their planning process has started. This gives the

executive office a small window of time to include

conditional grant-funded activities in their annual

budget and address any gaps with discretionary sources,

sometimes delaying the finalization of local budgets.

� Functionality of the province governments is

hampered by low institutional capacity and

underdeveloped legal and policy frameworks. While

federal governments and local levels continue to perform

functions relative to those in the pre-federal context,

the role of provincial governments as a ‘new’ level of

government remains unclear and underdeveloped.

Delays in the formulation of many policies restrict the

ability of province-level governments to establish their

jurisdiction and the institutional capacity and processes.

Recommendations

y Anchor the budget allocation processes for federal

programs in outcome- and evidence-based and

participatory process, to ensure allocative efficiency

and responsiveness of the budget to local needs. in

particular, sectoral ministries should prepare guidelines

for conditional grants allocation that clarify the process

and framework, use of data collected through sectoral

information systems, and the role of local levels in the

process, among others.

y Align the budgeting processes and timelines for all

three levels so that the province and local levels are

76


provided the budget ceilings for all conditional grant-

funded programs for the following fiscal year earlier on

during their planning processes. This could be achieved

by starting the conditional grant allocation process

earlier and providing the budget ceiling and breakdown

together with the ceilings for FEGs and revenue-sharing

amounts by around mid-March.

y invest in improving the quality and usability of

information systems (including data on activities as well as

financial aspects and ensuring their interoperability) and

the capacity of planners at all three levels of government

to use them for program design and planning. One way

this could be achieved is by improving interoperability

between various sectoral program systems and investing

in an integrated social registry approach to streamline

beneficiary targeting and monitoring across programs by

different levels of government.

y improve the participation of the population, particularly the

poor and vulnerable, in the planning process at the local

level to encourage responsive and accountable planning.

This is particularly important to ensure that local levels do

not formulate policies that restrict certain individuals or

groups from exercising their fundamental rights as provided

in the Constitution, including for social protection.

Fund Flow and Implementation

� Multiple processes, timelines, and mechanisms for

intergovernmental fund flow create inefficiencies.

Local levels receive funds from multiple sources,

using different modalities. This creates a significant

administrative burden for both the local government

and service providers and affects service delivery. At

the provincial level, the lack of clear guidelines on fund

flow arrangements has led to delivery issues for some

programs.

� The multiplicity of fund flow modalities from the

local levels to service delivery facilities affects

service delivery. Social protection programs vary

in the frequency and timing of services or transfers:

scholarships are provided once a year, at the beginning

of the school year; midday meals are provided

throughout the school year; SSAs are provided every

four months; and so on. Anecdotal evidence suggests

variations in program delivery processes due to delay

in the release of the funds, inefficient planning and

prioritization by the local level, and variations in fund

flow modality between the local level and service

delivery facilities. These often result in service disruptions

and poor beneficiary experience and may also reduce

the effectiveness of the programs themselves. Additional

programming by the province and local levels further

add to the complexity of streamlining and standardizing

service delivery and program implementation.

Recommendations

y Streamline fund flow processes, modalities, and timelines

for different programs to achieve administrative

efficiency in planning and service delivery at the local

level. Federal and provincial governments can align

the timelines of fund flow through their respective

annual appropriation bills; however, the federal MOF

will probably need to play a stronger coordination and

regulatory role between various federal agencies and

provinces to achieve this. Transitioning to a fully digitized

fund transfer and payment ecosystem at the province

and local levels may also be another way to improve

efficiency in fund flow.

y Develop standards and guidelines for intra-governmental

fund flow between the local level and service delivery

facilities to ensure continuity of service provision. This

could be achieved through the sectoral ministries that

were previously responsible for these facilities and have

a longer institutional knowledge of financial needs and

flows preparing these standards, or the standards could

be developed and implemented jointly through the

ministries of finance and federal affairs.

77


Monitoring and Reporting

� Financial and physical reporting requirements differ

in their timing, procedures, and nomenclatures,

constraining effective monitoring. Reporting

requirements for federally budgeted and conditional

grant-funded programs differ in their timing and

procedures. in addition, budgeting and reporting use

different categories, which prevent the analysis needed

to improve allocation and efficiency, the monitoring

of progress, and the oversight of programs. indeed,

financial reports are presented using economic headings

and functional categories, while expenditures are not

linked to programs or activities.

� At the federal level, low capacity to monitor program

implementation poses challenges. Line ministries at

the federal and provincial levels have broad mandates

to monitor sectoral program implementation. However,

they have limited capacity and policy clarity to fully

exercise this mandate. in addition, information systems

do not provide the data quality or integration required

for rigorous monitoring of physical and financial

progress. in addition, the role of provinces in monitoring

local-level schools and health facilities is considered

by some as going against the spirit of the Constitution.

Capacity constraints, at both the institutional and

systems levels, thus pose a major challenge to build an

effective system for vertical oversight in social protection

delivery in Nepal’s federal structure.

Recommendation

y Develop and implement information systems and

procedures for financial and physical monitoring to

effectively create vertical and horizontal oversight

mechanisms to ensure accountability and inclusiveness.

The systems need to be simple enough to ensure the

quality and timeliness of data entry; interoperable to

allow for analysis of budget, spending, and program

implementation; and comprehensive to allow for a

harmonized reporting on different sources of funds.

y Strengthen the capacity of local levels, including wards,

to plan, implement, and monitor service delivery through

(a) developing and deploying systems and processes and

(b) increasing institutional capacities to improve service

delivery at the local levels. This includes investment

to improve integration, quality, and usability of data

and reporting systems (both on activities and financial

aspects) and capacity of planners at all three levels

of government to use them for program design and

planning. Capacity support to the local levels would also

be essential to ensure participatory planning processes

that include the voices and needs of the poor and

vulnerable population in program design and delivery.

78


79


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leav

e, m

edic

al fa

cilit

y, s

taff

faci

litie

s, a

nd d

ecea

sed

staff

as-

sist

ance

for a

ll p

ublic

sec

tor e

mp

loye

es.

1,

649,

700

3Em

plo

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Pro

vide

nt

Fund

Man

dato

ry re

tirem

ent s

avin

gs s

chem

e fo

r all

publ

ic s

ecto

r em

ploy

ees.

Oth

er fo

rmal

sec

tor w

orke

rs c

an p

artic

ipat

e vo

lunt

arily

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fund

col

lect

s 10

% o

f sal

ary

mat

ched

by

the

emp

loye

r.

600,

000

11,7

29,5

00

Min

istr

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f Lab

or,

Em

plo

ymen

t an

d S

oci

al S

ecu

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4SS

FC

ontr

ibut

ory

sche

mes

for a

ll w

orke

rs to

pro

vide

med

ical

, hea

lth,

and

ma-

tern

ity

ben

efit;

acci

dent

and

dis

abili

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enefi

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enefi

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dep

ende

nt fa

mily

m

emb

ers;

and

old

age

ben

efit.

12,3

30

emp

loye

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156,

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emp

loye

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of A

pril

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20

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00

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sura

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ranc

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ith c

over

age

up to

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100

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per

hou

seho

ld a

nd p

er

indi

vidu

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r tho

se o

ver 7

0 ye

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ge.

The

pre

miu

m is

fully

sub

sidi

zed

for h

ouse

hold

s id

entifi

ed a

s p

oor a

nd in

di-

vidu

als

over

70

year

s of

age

.

Cov

erag

e up

to N

PR

100,

000

for a

n an

nual

p

rem

ium

of N

PR 3

,500

for

a fa

mily

of fi

ve, w

ith N

PR

425

for e

ach

addi

tiona

l m

emb

er

2,71

5,15

4 in

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dual

s in

731

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(a

s of

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itize

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inve

stm

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ferr

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vest

men

t for

retir

emen

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for p

ublic

and

priv

ate

sect

or

emp

loye

es; p

artic

ipat

ion

is v

olun

tary

.60

0,00

0n.

a.

80


100.

In a

dditi

on to

sch

olar

ship

s in

com

mun

ity s

choo

ls, i

nstit

utio

nal (

priv

ate)

sch

ools

are

requ

ired

to o

ffer n

eed-

base

d tu

ition

wai

vers

to 1

0 pe

rcen

t of t

otal

num

ber o

f stu

dent

s, ba

sed

on p

over

ty, e

thni

city

, dis

abili

ty,

dilig

ence

, and

so

on.

101.

Brea

kdow

n by

sch

olar

ship

type

not

ava

ilabl

e; d

evol

ved

to lo

cal l

evel

s ex

cept

for p

ro-p

oor t

arge

ted

scho

lars

hips

.

Pro

gra

mD

escr

ipti

on

an

d E

ligib

ility

Cri

teri

aB

enefi

t Am

ou

nt98

Ben

efici

arie

s (F

Y19

)99

FY19

Exp

end

itu

re

(NP

R, t

ho

usa

nd

s)

Soci

al A

ssis

tan

ce

Min

istr

y o

f Ho

me

Aff

airs

1

Soci

al S

ecur

ity

Allo

wan

ces

2,75

4,13

3 in

divi

dual

s (F

Y20)

41,1

50,0

00

Seni

or c

itize

n al

low

-an

ceA

llow

ance

for a

ll D

alits

and

Kar

nali

resi

dent

s ag

e 60

and

ove

r and

all

othe

rs

age

70 a

nd o

ver

NPR

2,0

00 p

er m

onth

1,22

6,78

6

Sing

le w

omen

and

w

idow

s’ al

low

ance

A

llow

ance

for s

ingl

e (u

nmar

ried

and

divo

rced

) wom

en a

ge 6

0 ye

ars

or o

lder

an

d w

idow

s of

all

ages

NPR

2,0

00 p

er m

onth

705,

564

Full

disa

bili

ty a

llow

-an

ce

Allo

wan

ce fo

r tho

se w

ho c

anno

t go

abou

t dai

ly li

fe, e

ven

with

hel

p fr

om o

th-

ers,

for e

xam

ple

, tho

se c

omp

lete

ly b

lind

and

deaf

or p

aral

yzed

. To

be

elig

ible

, th

ose

with

dis

abili

ty n

eed

to o

bta

in a

red

card

.N

PR 3

,000

per

mon

th41

,844

Part

ial d

isab

ility

al-

low

ance

A

llow

ance

for t

hose

who

can

go

abou

t dai

ly li

fe w

ith h

elp

from

oth

ers.

To

be

elig

ible

, tho

se w

ith d

isab

ility

nee

d to

ob

tain

a b

lue

card

.N

PR 1

,600

per

mon

th73

,784

Enda

nger

ed e

thni

city

al

low

ance

A

llow

ance

for i

ndiv

idua

ls w

ho b

elon

g to

one

of t

he 1

0 et

hnic

ities

con

side

red

enda

nger

edN

PR 3

,000

per

mon

th24

,042

Chi

ld g

rant

N

utrit

ion

gran

t for

all

Dal

it ch

ildre

n un

der fi

ve a

nd a

ll ch

ildre

n un

der fi

ve in

se

lect

ed d

istr

icts

(11

dist

ricts

in 2

020)

NPR

400

per

mon

th68

2,11

3

Med

ical

allo

wan

ceA

llow

ance

to c

over

med

ical

trea

tmen

t exp

ense

s fo

r citi

zens

age

70

year

s an

d ov

erN

PR 1

,000

per

mon

th1,

146,

457

2Re

cons

truc

tion

and

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bili

tatio

n Pr

ogra

m

Cas

h tr

ansf

ers

to v

ictim

s of

con

flict

and

vic

tims

of th

e p

eop

le's

mov

emen

t an

d th

eir f

amili

esVa

ryin

g am

ount

s 78

610

0,00

0

Min

istr

y o

f Ed

uca

tio

n, S

cien

ce a

nd

Tec

hn

olo

gy

3Sc

hola

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ps

unde

r SSD

P100 **

3,15

7,82

3101

2,90

0,75

4

No

nre

sid

enti

al

3.1

Dal

itSc

hola

rshi

p to

all

Dal

it st

uden

ts in

Gra

des

1–10

NPR

400

NPR

500

for G

rade

10

3.2

Girl

sSc

hola

rshi

p to

all

fem

ale

stud

ents

in G

rade

s 1–

8 an

d al

l fem

ale

stud

ents

in

Gra

des

1–10

in K

arna

li

NPR

400

nat

ionw

ide

in K

arna

liN

PR 1

,000

for G

rade

s 1–

5N

PR 1

,500

for G

rade

s 6–

8

81


Pro

gra

mD

escr

ipti

on

an

d E

ligib

ility

Cri

teri

aB

enefi

t Am

ou

nt98

Ben

efici

arie

s (F

Y19

)99

FY19

Exp

end

itu

re

(NP

R, t

ho

usa

nd

s)

3.3

Dis

abili

tyA

ll di

sab

led

stud

ents

in G

rade

s 1–

10; b

enefi

t am

ount

s va

ry b

ased

on

the

disa

bili

ty c

ateg

ory.

Cat

egor

y A

: NPR

40,

000

Cat

egor

y B:

NPR

5,0

00C

ateg

ory

C: N

PR 3

,000

Cat

egor

y D

: NPR

1,0

00

3.4

Con

flict

aff

ecte

dSc

hola

rshi

p fo

r chi

ldre

n of

con

flict

-aff

ecte

d fa

mili

es. U

p to

thre

e ch

ildre

n un

der 1

8 ye

ars

from

one

fam

ily a

re e

ligib

le.

Prim

ary:

NPR

10,

000

Low

er s

econ

dary

: NPR

12

,000

Seco

ndar

y: N

PR 1

4,00

0H

igh

scho

ol: N

PR 1

6,00

0

2,70

0

3.5

Mar

tyr’s

chi

ldre

nSc

hola

rshi

p fo

r chi

ldre

n of

indi

vidu

als

decl

ared

mar

tyrs

by

the

Gov

ernm

ent

ECD

and

Gra

des

1–5:

NPR

12

,000

Gra

des

6–10

: NPR

18,

000

Hig

h sc

hool

and

ab

ove:

N

PR 2

4,00

0

3.6

Enda

nger

ed a

nd

mar

gina

lized

gro

ups

Scho

lars

hip

for c

hild

ren

of 2

6 en

dang

ered

and

mar

gina

lized

gro

ups,

age

less

th

an 1

8 ye

ars

stud

ying

in G

rade

s 1–

10A

ccor

ding

to g

uide

line

3.7

Ram

Nar

ayan

Mis

hra

Spec

ial S

chol

arsh

ipSc

hola

rshi

ps

awar

ded

to fe

mal

e st

uden

ts in

Gra

des

11 a

nd 1

2 in

Ter

ai-M

ad-

hesh

, bel

ongi

ng to

Dal

it, M

uslim

, mar

gina

lized

, or e

ndan

gere

d co

mm

uniti

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ot s

pec

ified

3.8

Dal

it, C

hep

ang,

and

Ra

ute

child

ren

in

Gra

des

11 a

nd 1

2Sc

hola

rshi

p to

poo

r Dal

it, C

hep

ang,

and

Rau

te c

hild

ren

in G

rade

s 11

and

12

Not

sp

ecifi

ed

3.9

Scho

lars

hip

s to

Fre

ed

Kam

alar

iSc

hola

rshi

ps

awar

ded

to th

ose

free

d fr

om b

onde

d la

bor

Gra

des

1–8:

NPR

1,5

00G

rade

s 9–

10: N

PR 1

,800

Gra

des

11–1

2: N

PR 5

,000

Hig

her e

duca

tion:

NPR

10

,000

3.10

Pro-

poo

r tar

gete

d sc

hola

rshi

ps

for

Gra

des

9–12

Scho

lars

hip

s p

rovi

ded

to s

tude

nts

from

hou

seho

lds

iden

tified

as

poo

r by

the

Poor

Hou

seho

ld id

entifi

catio

n Bo

ard,

whe

re im

ple

men

ted,

or p

oor b

ased

on

self-

rep

orte

d Pr

oxy

Mea

ns T

estin

g (P

MT)

.O

ther

elig

ibili

ty c

riter

ia in

clud

e 80

% a

tten

danc

e, n

ot fa

iled

any

grad

e, a

nd

not m

arrie

d b

efor

e th

e le

gal a

ge.

Gra

des

9 an

d 10

: NPR

6,0

00Sc

ienc

e st

uden

ts in

Gra

des

11 a

nd 1

2: N

PR 2

4,00

0O

ther

sub

ject

s in

Gra

des

11 a

nd 1

2: N

PR 1

8,00

0.

34,0

00

Res

iden

tial

3.11

Dis

abili

tySo

me

of th

e C

ateg

ory

A s

chol

arsh

ips

from

the

4 ca

tego

ries

liste

d in

3.3

3.12

Mou

ntai

n Re

side

ntia

l Sc

hola

rshi

p

Scho

lars

hip

s fo

r stu

dent

s fr

om m

argi

naliz

ed c

omm

uniti

es in

Gra

des

6–10

fr

om o

utsi

de th

e ca

tchm

ent a

rea

of re

mot

e m

ount

ain

scho

ols

NPR

40,

000

per

yea

r

3.13

Free

d Ka

mal

ari

Scho

lars

hip

s aw

arde

d to

thos

e fr

eed

from

bon

ded

lab

or s

tudy

ing

in re

side

n-tia

l sch

ools

in G

rade

s 11

and

12.

Rs. 4

0,00

0 p

er y

ear

82


Pro

gra

mD

escr

ipti

on

an

d E

ligib

ility

Cri

teri

aB

enefi

t Am

ou

nt98

Ben

efici

arie

s (F

Y19

)99

FY19

Exp

end

itu

re

(NP

R, t

ho

usa

nd

s)

3.14

Mod

el R

esid

entia

l Sc

hola

rshi

p

Scho

lars

hip

s fo

r sel

ecte

d st

uden

ts, i

nclu

ding

thos

e st

udyi

ng in

Bud

hani

lkan

-th

a Sc

hool

and

Gan

daki

Boa

rdin

g Sc

hool

, in

Gra

des

5–10

Rs. 4

0,00

0 p

er y

ear

3.15

Feed

er H

oste

ls

Scho

lars

hip

s fo

r sel

ecte

d fe

mal

e st

uden

ts s

tudy

ing

in G

rade

s 9–

12 in

feed

er

host

els

(20

dist

ricts

)Rs

. 40,

000

per

yea

r

4M

idda

y M

eals

**Pr

ovis

ion

of o

ne m

idda

y m

eal i

n sc

hool

s to

imp

rove

nut

ritio

n am

ong

scho

ol-

goin

g ch

ildre

n in

EC

D to

Gra

de 5

in fo

od-in

secu

re d

istr

icts

of N

epal

. Sca

led

up fr

om 3

3 di

stric

ts in

FY

20 to

nat

ionw

ide

in F

Y 21

.

Ave

rage

of N

PR 1

5 p

er

mea

l for

180

sch

ool d

ays

per

yea

r1,

094,

316

2,89

4,92

9

5Fo

od fo

r Edu

catio

n**

(man

aged

by

WFP

)Pr

ovis

ion

of o

ne m

idda

y m

eal i

n sc

hool

s, c

over

ing

all s

tude

nts

in E

CD

to

Gra

de 5

in 1

1 se

lect

ed d

istr

icts

Ave

rage

of N

PR 1

5 p

er

mea

l for

180

sch

ool d

ays

per

yea

r21

8,15

340

,000

6

Hig

her E

duca

tion

Scho

lars

hip

s un

der

Uni

vers

ity

Gra

nt

Com

mis

sion

and

H

ighe

r Edu

catio

n Re

form

Pro

ject

Pove

rty-

targ

eted

sch

olar

ship

s fo

r stu

dent

s in

Gra

des

11 a

nd 1

2 an

d hi

gher

ed

ucat

ion

leve

ls fo

r stu

dent

s id

entifi

ed a

s p

oor b

y PM

T an

d ot

her u

nive

rsit

y sc

hola

rshi

ps

Hig

h sc

hool

: NPR

14,

000

per

yea

rBa

chel

or’s

degr

ee: N

PR

18,0

00 p

er y

ear

9,50

015

7,66

1

7Sa

nita

ry P

ad D

istr

ibu-

tion

Prog

ram

* Pr

ovis

ion

of fr

ee s

anita

ry p

ads

to a

ll fe

mal

e st

uden

ts, i

nitia

ted

in 2

020

unde

r th

e Pr

esid

ent's

Edu

catio

n im

pro

vem

ent P

rogr

am

Min

istr

y o

f Hea

lth

an

d P

op

ula

tio

n

8

Safe

Mot

herh

ood

Prog

ram

**A

ama

Sura

kshy

a Ka

ryak

ram

Cash

ince

ntiv

e to

mot

hers

to d

eliv

er a

t hea

lth fa

cilit

ies,

to im

prov

e th

eir h

ealth

out

-co

mes

and

thos

e of

thei

r bab

ies.

The

prog

ram

cov

ers (

a) c

ash

tran

sfer

to m

othe

rs

for t

rans

port

atio

n co

st, (

b) in

cent

ives

for f

our a

nten

atal

car

e vi

sits

, (c)

reim

burs

e-m

ent t

o fa

cilit

ies f

or in

stitu

tiona

l del

iver

y, (d

) blo

od tr

ansf

usio

n, (e

) em

erge

ncy

refe

rral

s, in

clud

ing

air l

iftin

g, (f

) abo

rtio

n, a

nd (g

) fre

e si

ck n

ewbo

rn c

are.

Cas

h in

cent

ive

to m

othe

rs:

NPR

1,0

00 in

Ter

aiN

PR 2

,000

in th

e hi

llsN

PR 3

,000

in th

e m

ount

ain

425,

000

(FY1

8)1,

080,

000

9U

terin

e p

rola

pse

*Fr

ee s

urge

ry to

trea

t ute

rine

pro

lap

se

10

Poor

Citi

zens

Med

ical

Tr

eatm

ent F

und

(Bip

anna

Nag

arik

A

usha

dhi U

pac

har

Kosh

)

Med

ical

exp

ense

s up

to N

PR 1

00,0

00, f

or p

oor c

itize

ns, a

s re

com

men

ded

by

the

loca

l-lev

el c

omm

ittee

or m

emb

ers

of h

ouse

hold

s id

entifi

ed a

s p

oor b

y th

e Po

or H

ouse

hold

iden

tifica

tion

Boar

d, fo

r tre

atm

ent o

f sp

ecifi

ed d

isea

ses

(hea

rt d

isea

se, k

idne

y di

seas

e, c

ance

r, Pa

rkin

son’

s, A

lzhe

imer

’s, s

pin

al a

nd

head

inju

ry, a

nd s

ickl

e ce

ll an

emia

).Th

e fu

nd re

imb

urse

s th

e lis

ted

hosp

itals

for s

pec

ific

trea

tmen

ts; t

he s

ame

amou

nts

are

dedu

cted

from

the

pat

ient

’s b

ills.

NPR

100

,000

in a

dditi

on, f

or k

idne

y di

seas

e:M

edic

atio

n co

sts

up to

N

PR 1

00,0

00 fo

r pos

t-re

nal

tran

spla

nt c

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cost

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east

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loca

l m

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rate

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age:

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f Wo

men

, Ch

ildre

n a

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t-er

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is fa

cilit

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exp

ense

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at t

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ome

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ters

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fare

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ram

for t

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with

dis

abili

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nd s

enio

r citi

zens

, inc

ludi

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odel

old

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e ho

mes

Fund

s to

old

-age

hom

es56

,500

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istr

y o

f Lan

d M

anag

emen

t, C

oo

per

ativ

es a

nd

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erty

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viat

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arib

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ga B

isw

esh-

wor

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pro

gram

sup

por

ts in

com

e ge

nera

tion

for t

he p

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st, i

nclu

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see

d ca

pita

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ts, p

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ning

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400

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istr

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ople

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side

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m)

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ing

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he m

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ed, i

nclu

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low

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t hou

sing

for

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it an

d M

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lds

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in 3

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s (F

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und

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ENT

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and

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ess

to a

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d jo

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lace

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t 11

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RESk

ills

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ning

for i

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rove

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ility

and

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ease

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f liv

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rent

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rt tr

aini

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ith O

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und*

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, man

aged

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Dep

artm

ent o

f Sm

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nd C

otta

ge in

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ries,

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s to

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en e

ntre

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cial

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d fo

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to

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for s

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l an

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m e

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(SM

Es).

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istr

y o

f Wo

men

, Ch

ildre

n a

nd

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cial

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fare

5Pr

esid

ent’s

Wom

en

Up

liftm

ent P

rogr

am

The

pro

gram

aim

s to

imp

rove

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en’s

livel

ihoo

ds a

nd e

mp

ower

men

t. Th

e p

rogr

am p

rovi

des

gran

t sup

por

t for

inco

me-

gene

ratin

g ac

tiviti

es in

agr

icul

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re, t

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m, o

r non

-agr

icul

ture

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tor;

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enes

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t ea

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riage

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AW, a

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o on

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nt o

f NPR

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0 fo

r a g

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tor

295,

700

85


Using economic forecasts from the World Bank and

population projections from the United Nations (UN), we

project the likely beneficiary numbers and cost for selected

social assistance programs from 2021 to 2030. Coverage rates

Assumptions Used in ProjectionsAnnex 2:

Macroeconomic assumptions

GDP at current pricesWorld Bank projections for 2020–2025; GDP subsequent to 2025 is estimated to be an average of rates between 2021 and 2025.

Consumer Price index (CPi) World Bank for 2020–2025; CPi subsequent to 2025 is assumed to be equal to CPi from 2025.

Population UN Population estimates, medium varianthttps://population.un.org/wpp/Download/Standard/CSV/

were estimated using various surveys and administrative

data. The coverage of SSAs was estimated by comparing FY18

administrative data to the number of eligible beneficiaries

derived from NLFS iii.

Eligible population Coverage rates Benefit levels

Senior citizens

Those age 70 and over, minus an esti-mated 1% who receive public sector pensions based on NLFS iii

Those age 60 and over among Dalits and Karnali residents, assumed to be 15% of the total population based on administrative data and NLFS iii

Coverage assumed to be 85% (82% based on administrative data and NLFS iii, assumed to have increased by 3% since 2018 based on the fact that beneficiaries in admin-istrative data [7%] have increased at twice the rate of eligible population growth [2.5%] imply-ing an increase in coverage)

NPR 24,000 per year

Those over 70 years also receive NPR 12,000 as medical treat-ment allowance.

Single women

All single women over 60 years and widows of any age are eligible.Single women ages 60–70 and widows below the age of 70 assumed to be 8% of total female popula-tion based on administrative data and NLFS iii, excluding the eligible already captured in the senior citizen category

Coverage assumed to be 90%(88% based on administrative data and NLFS iii, assumed to have increased by 2% since 2018)

NPR 24,000 per year

Child grant in 25 selected districts

Assumed to be 84% of the total popu-lation under 5, based on administra-tive data and NLFS iii

Coverage assumed to be 84% based on admin-istrative data and NLFS iii

NPR 4,800 per year

Endangered ethnicities

2020 administrative data as baseline Coverage assumed to be 100% NPR 36,000 per year

Full disability 2020 administrative data as baseline Coverage assumed to be 51% based on HRVS NPR 36,000 per year

Partial disability Baseline from 2020 administrative data

Coverage assumed to be 51% based on HRVS NPR 19,200 per year

SSAEP

Assumed to be households in the bot-tom 20 percentile based on estimated poverty scores, excluding those receiving senior citizen allowance and single women allowance

Assumed to have 100% coverage Assumed to be NPR 24,000 per year

86


Eligible population Coverage rates Benefit levels

PMEP

A share of the unemployed, assumed to be 6% of all ages 18–59 based on NLFS iiiUnemployment rate assumed to be constant

Assumed to cover the unemployed in the bot-tom 20th percentile, about 175,000 individuals in 2020Expanded coverage: all unemployed in the bot-tom 40th percentile, about 370 individuals in 2020

NPR 51,700, equivalent to 100 days of work at minimum wage of NPR 517 per day

Safe Mother-hood

Number of live births based on popu-lation projectionsRate of institutional deliveries as-sumed to be 57.6 percent and share of deliveries in public facilities assumed to be 75% based on DHS 2016.

Currently assumed to be 57.6 percent based on 2016 DHS, projected to increase according to the Government’s targets to achieve 90% by 2030

Assumed to be NPR 4,700 per mother based on 2020 total cost of the program divided by number of beneficiaries accord-ing to administrative data

Girls Scholar-ships, Grades 1–8

All girls in Grades 1–8

Baseline from MOEST Flash Report 2018–19 for intake, drop out, and repetition rates; enrol-ment projections based on female population between 6 and 14 years; number of students assumed to grow slightly with marginally im-proving efficiency rates in primary levelsShare of students in public schools assumed to remain at 2019 levels

NPR 400 per year

Dalit Scholar-ships, Grades 1–8

All Dalit students in Grades 1–8

Share of Dalit students assumed to be 16.9% in primary level and 14.4% in upper basic level based on MOEST Flash Report 2018–19; all Dalit children assumed to go to public schoolNumber of students assumed to grow slightly with marginally improving efficiency rates in primary levelsAll other scholarships expenditure, besides these two categories, assumed to grow at 10% each year

Midday meals

All children in ECED and primary level in 44 districts in 2020, assumed to be 40% of all children enrolled in ECED and primaryExpanded nationwide in 2021

ECED and primary enrolment estimates based on MOEST Flash Report 2018–19 for intake, drop out, and repetition ratesNumber of students assumed to grow slightly with marginally improving efficiency rates in primary levels

Assumed to be NPR 15 per meal for 180 school days per year

Methodology for Calculating Poverty ScoresPoverty estimations were made using the PMT method.

This method estimates a household’s socio-economic status

using a composite measure that calculates a weighted score

based on observable household characteristics which are

considered proxies for income or consumption. The poverty

scores used in these simulations are derived from ordinary

least squares (OLS) regressions of (natural log of ) monthly

per capita household consumption on a set of dependent

variables (typically variables that are relatively easier to

collect at greater frequency and for the entire population

than the detailed household survey data used to estimate

income or consumption). The estimates are based on the

AHS 2016 -17, which is nationally representative. The PMT

formula was estimated in three steps: First, a set of variables

that are common between the AHS 2016-17 and the NLFS

2017–2018 and correlated with household consumption were

identified (final set presented in Table (a) below). Second, an

OLS regression was run on the natural log of per capita real

consumption expenditure, allowing for district fixed effects.

Third, the resulting score was applied to infer a poverty

score for each household in the NLFS. Since predictions are

never exact, it is expected that some poor will incorrectly be

assigned scores that identifies them as non-poor, and some

87


non-poor will be incorrectly identified as poor. For this model,

key performance indicators are presented in Table (b) for

different income percentiles.

Location � District

Demographics � Household size

House characteristics � Material of house outer wall

� Material of house foundation

� Material of house roof

� Availability of piped water

� Type of fuel availability

� Availability of electricity

� Type of toilet used

� internet availability

� Cable TV availability

Asset ownership � Ownership of house

� Ownership of cell phone

r2Income

PercentileCoverage

(%)Under-Coverage

(%)Leakage

(%)

0.58 10 4 77 47

0.58 15 9 64 39

0.58 20 14 56 36

0.58 25 20 47 34

0.58 30 26 40 30

0.58 40 38 30 26

0.58 50 49 23 21

0.58 60 59 17 16

0.58 70 71 12 13

0.58 80 83 7 10

(a) Variables Used in PMT Model

(b) Key Performance Indicators

88


Framework and Indicators for Estimating Intergovernmental Transfers102

Annex 3:

Criteria/Indicators Weight (%)

FEG

Minimum Amount (MA) Population25 and 26.26 of FEG for local levels and provinces, respectively

Performance-Based Amount (PBA)

7 sets of indicators each for provinces and local levels related to financial and legislative procedures

5 of FEG-MA

Formula-Based Amount (FBA) 95 of FEG-MA

Human Development Index 10

Social and Economic Inequalities 5

Infrastructure Development Status 10

� Road density 6

� Electricity access 1

� information technology (iT) services access 1

� Drinking water access 1

� Sanitation (toilet availability) 1

Revenue Status 5

Expenditure Need 70

Criteria/Indicators (%) Weight (%) Local Level (%)

Revenue Distribution 70 15 15

Natural Resources Royalty Redistribution 50 25 25


Population and Demographic profile 60

� Total Population 42

� Dependent Population 18

Area 15

Human Development Index 5

(a) FEG Allocation Framework and Indicators

(b) Proportion of Distribution of Revenue Resources between levels of Government

(c) Revenue Redistribution Framework and Indicators

102 Adapted from NNRFC guidance notes available at www.nnrfc.gov.np.

89



Revenue Collection Efforts 3

Infrastructure Development Status 10

� Road density 6

� Electricity access 1

� iT services access 1

� Drinking water access 1

� Sanitation (toilet availability) 1

Special Conditions 2

� Population of Disabled 0.40

� Social and Economic inequalities 1.60

90


FY19 per Capita Program Budget by Poverty Incidence

Annex 4:

(a) Per Capita SSA Allocation vs Poverty Rate

(b) Per Capita Safe Motherhood vs Poverty Rate

91


Source: MOF, MOHA,MOEST, MOHP, World Bank

R² = 0.0254

-300

0

300

600

900

1200

0% 25% 50% 75% 100%

(c) Per Capita Scholarship Budget vs Poverty Rate

(d) Per Capita Midday Meal Budget vs Poverty Rate

92


(a) Per Capita Scholarship vs FY18 Net Enrolment Rate

(b) Per Capita Midday Meal vs FY18 Net Enrolment Rate

(c) Graduation Rate vs Per Capita Scholarship (FY19)

School Scholarship Program and Midday Meal Program per Capita Budget for FY19 by Education Indicators

Annex 5:

93


(d) Graduation Rate vs Per Capita Midday Meal (FY19)

(e) Graduation Rate vs Poverty Rate

(f) Net Enrolment Rate vs Poverty Rate

Source: MOF, MOEST, World Bank

94


Safe Motherhood Program per Capita Budget for FY19 by Health Indicators

Annex 6:

(a) Per Capita Safe Motherhood vs Institutional Delivery Rate

(b) Per Capita Safe Motherhood vs Expected Pregnancies

95


Source: MOF, MOHP, World Bank

(c) Institutional Delivery Rate vs Poverty Headcount

96


OLS Estimates of Determinants of per Capita Program Budget by Local Levels

Annex 7:

(a) Per Capita SSA

(b) Per Capita Safe Motherhood

(c) Per Capita Scholarship

(d) Per Capita Midday Meal

(e) Per Capita for All 4 Programs

(e) Change in Gradua-tion Rates FY18–FY19

Metropolitan‡ −800.1*** −57.72 −30.44* −126.4 −801.1** 5.664

Sub-metropolitan −401.6*** −86.94** −12.31* −125.0** −485.7*** 3.968

Urban Municipality −133.6* −13.07*** −3.545* −48.82** −182.8*** 1.522

Hill 270.4*** 9.601** 14.70*** −2.018 267.5*** 6.760***

Mountain 373.7*** 22.27*** 11.77*** 136.1*** 617.0*** 8.056***

Province 1 229.3** −14.62** −6.551** −326.8*** −185.0* −0.901

Province Bagmati 335.4** −11.79* −13.54*** −185.4*** 42.26 7.084***

Province Gandaki 801.7*** −16.78** −2.895 −329.6*** 490.8*** −2.781

Province Lumbini 283.7*** −23.83*** −1.039 −213.2*** −7.597 −0.806

Province Karnali 324.6** −20.77** 19.12*** 69.34 350.4** 4.193*

Province Sudur Pashchim 647.6*** −23.16*** 3.855 −328.1*** 155 4.163*

Surface Area 0.371 0.0447*** −0.00516 0.0444 0.635** −0.00227

Poverty Headcount Ratio † −8.094*** −0.533*** 0.452*** −0.589 −5.753* −0.0465

Hospital†† −26.99***

Primary Health Care Center −4.353

Health Post −3.015***

Community Health Unit −2.979*

Other Health Facilities −2.856

institutional Delivery Rate 0.663***

Total Expected Pregnancies 0.0108*

Number of Basic Level Schools††

−0.164*** 0.389

Target Student Group Popu-lation†††

0.00178*** −0.00278

Net Enrolment Rate for Girls −0.00426 −11.31

Net Enrolment Rate Total 0.411 15.55

Primary Level Graduation Rate (Girls)

0.383 −30.30***

Primary-Level Graduation Rate (Total)

0.461 33.95***

Basic Level Graduation Rate (Girls)

−0.117 26.80***

Basic-Level Graduation Rate (Total)

−0.781 −31.56***

Per Capita Scholarship FY19 −0.0527

97


Note:*p < 0.05, **p < 0.01, ***p < 0.001.‡ Reference groups for geographic variables are Rural Municipality, Terai, and Province 2, respectively.† World Bank staff estimates based on NLSS 2010/11.†† Health and education sector variables from HMiS and EMiS for FY18.††† Target group students include girl students, boy Dalit and Janajati students, and disabled students.

(a) Per Capita SSA

(b) Per Capita Safe Motherhood

(c) Per Capita Scholarship

(d) Per Capita Midday Meal

(e) Per Capita for All 4 Programs

(e) Change in Gradua-tion Rates FY18–FY19

Per Capita Midday Meal FY19

−0.000704

Midday Meal Recipient (Yes/No)

0.745

Student Teacher Ratio −0.00193

_constant 1,224.9*** 44.74*** −5.152 −54.72 1,637.0*** −2.477

Number of Observations 753 753 753 753 723 748

R-squared 0.2686 0.5397 0.5842 0.4249 0.2972 0.0957

98


Share of Social Protection in Total, Earmarked, and Discretionary Expenditures at Local Levels, FY19

Annex 8:

(a) By Ecological Zone

(b) By Province

in these figures, ‘earmarked’ expenditures include activities

funded through payment authorization and conditional and

complementary grants from federal and provincial levels.

‘Discretionary’ expenditure include those funded from

internal revenue and federal and provincial revenue-sharing

sources, as well as federal and provincial equalization grants.

99


Source: MOF

(c) By Local Level Type

100


Budg

etin

g Pr

oces

ses a

nd T

imel

ines

at F

eder

al a

nd

Loca

l Lev

els

An

nex

9:

Fed

eral

Lev

el B

ud

get

ing

Pro

cess

Prov

ince

and

Dis

tric

t Tre

asur

y C

ontr

olle

r Offi

ces

pre

par

e co

nsol

idat

ed fi

scal

rep

ort f

or

Prov

ince

s/ a

ll offi

ces

and

LLs

in

the

dist

ricts

Sub

mit

to F

inan

cial

C

omp

trol

ler G

ener

al

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ce

Min

istr

y of

Fin

ance

(M

OF)

pub

lishe

s co

nsol

idat

ed

finan

cial

rep

ort

Mid

Jan

uary

Nat

iona

l Pla

nnin

g C

omm

issi

on(N

PC)

pre

par

es M

ediu

m

Term

Exp

endi

-tu

re F

ram

ewor

k (M

TEF)

for n

ext

thre

e FY

s b

ased

on

inp

uts

from

lin

e m

inis

trie

s an

d M

OF

Nat

iona

l Res

ourc

e Es

timat

ion

Com

mitt

ee

(cha

ired

by N

PC

and

incl

udin

g M

OF)

pre

par

es

estim

ates

for

reve

nue

and

bud

get c

eilin

gs fo

r al

l thr

ee le

vels

for

next

thre

e ye

ars

bas

ed o

n th

e M

TEF

NPC

(bas

ed o

n es

timat

es o

f re

venu

e an

d ex

pen

ditu

re fo

r ne

xt th

ree

FYs)

se

nd B

udge

ting

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danc

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d Fr

amew

ork

on

to li

ne m

inis

trie

s,

com

mis

sion

, se

cret

aria

ts, a

nd

agen

cies

NPC

dis

cuss

ed

the

pro

pos

ed

annu

al p

lan

and

bud

get w

ith th

e ac

coun

ts

resp

onsi

ble

offi

cer o

f eac

h ag

ency

and

su

bm

its a

rep

ort

to th

e M

OF

MO

F di

scus

ses

the

pro

pos

ed

annu

al p

lan

and

bud

get w

ith

acco

unts

re

spos

ible

offi

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and/

or

desi

gnat

ed o

ffice

r

MO

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rop

oses

th

e an

nual

b

udge

t for

th

e fo

llow

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al Y

ear

Min

iste

r of

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ance

p

rese

nts

the

prin

cip

les

and

prio

ritie

s of

an

nual

bud

get

to th

e jo

int

sess

ions

of t

he

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iam

ent f

or

delib

erat

ions

Min

iste

r of

Fina

nce

pre

sent

s th

e an

nual

ap

pro

pria

tion

bill

an

d b

udge

t to

the

Parl

iam

ent,

afte

r sub

mitt

ing

Econ

omic

Sur

vey

Rep

ort f

or

curr

ent F

Y

End

Janu

ary

End

May

Mid

Feb

ruar

yM

id M

ay

Acc

ount

s re

spon

sib

le

office

rs o

f eac

h m

inis

try/

age

ncy

pre

par

es a

nnua

l p

lan

and

pro

gram

w

ith b

udge

t, in

clud

ing

for

sub

ordi

nate

offi

ces,

and

su

bm

its to

NPC

an

d M

OF

(bas

ed

on g

uida

nce

and

fram

ewor

k p

rovi

ded

by N

PC)

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l Lev

el B

ud

get

ing

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cess

GoN

, in

cons

ulta

tion

with

N

PC, p

rovi

des

estim

ates

of

tran

sfer

s fo

r fisc

al

equa

lizat

ion

gran

ts a

nd

reve

nue

shar

ing

for

follo

win

g ye

ar to

pro

vinc

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d lo

cal l

evel

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ince

pro

vide

s et

imat

es o

f fisc

al

tran

sfer

s fo

r the

fo

llow

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FY to

loca

l le

vels

Prov

ince

pro

vide

s es

timat

es o

f fisc

al

tran

sfer

s fo

r the

fo

llow

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FY to

lo

cal l

evel

s

Budg

et a

pp

rove

d by

the

exec

utiv

e O

ffice

is p

rese

nted

in

the

loca

l as

sem

bly

Loca

l lev

el B

udge

t an

d Pl

anni

ng

Com

mitt

ee p

rep

are

annu

al b

udge

t in

cons

ulta

tion

with

se

ctor

al

rep

rese

ntat

ives

and

su

bm

its to

the

exec

utiv

e offi

ce

Chi

ef A

dmin

istr

ativ

e O

ffice

r at t

he lo

cal

leve

l pro

vide

s th

e b

udge

t cei

lings

to

resp

ectiv

e di

visi

ons,

se

ctio

ns a

nd w

ard

com

mitt

ees,

who

th

en in

turn

pre

par

e b

udge

t for

pro

gram

, p

roje

cts

and

sub

mit

to th

e lo

cal l

evel

ex

ecut

ive

office

Loca

l lev

el R

esou

rce

Estim

atio

n &

Bud

get

Cei

ling

Com

mitt

ee

pre

par

es e

stim

ates

fo

r tot

al in

com

e fo

r fo

llow

ing

FY a

nd

bud

get c

eilin

g an

d fr

amew

ork

for

bal

ance

d al

loca

tion

of re

sour

ces

Prov

ince

an

d Lo

cal

Leve

ls (L

L)

pro

vide

es

timat

es o

f in

com

e an

d ex

pend

iture

fo

r fol

low

ing

FY to

MO

F

Loca

l Lev

el

Ass

emb

ly

app

rove

s th

e p

rese

nted

ann

ual

bud

get

Mid

Jan

uary

Mid

Mar

chM

id A

pril

3rd

wee

k Ju

neEn

d M

arch

Mid

Jun

eM

id J

uly

101


The figures present information on the SSA program, the School Scholarship Program (SSP), the midday meal program (MMM),

and the Safe Motherhood Program (SMP).

Fund Flow of Key Programs before and after Federal Restructuring

Annex 10:

(a) Before Restructuring

MOF

DTCO DDC/Municipality DEO DPHO

MOHPMOFALD MOE

VDC/ Ward Schools

SSA Beneficiaries

SSP/MMM Beneficiaries

SMP Beneficiaries

BC/ Hospital

(a) After Restructuring

MOFALD

DTCO

MOF

Municipality

Ward Schools

SSA Beneficiaries

SSP/MMM Beneficiaries

SMP Beneficiaries

SMP Beneficiaries

BC Hospitals

MOE MOHP

Province

102


Inst

itut

iona

l Arr

ange

men

t for

the

Del

iver

y of

SP

Prog

ram

s at t

he L

ocal

Lev

el

An

nex

11:

Loca

l lev

el A

ssem

bly

Loca

l lev

el E

xecu

tive

Offi

ce

Cha

irper

son/

May

or

Dep

uty

Cha

irper

son/

May

or

inte

rnal

Aud

it U

nit

Chi

ef A

dmin

istr

ativ

e O

ffice

r

CR/

SSA

Foc

al

Pers

onH

ealt

h C

oord

inat

orEd

ucat

ion

Offi

cer/

Re

sour

ce P

erso

n

Birt

hing

Cen

ters

Scho

ols

Scho

ol/ S

chol

arsh

ip

Man

agem

ent

Com

mitt

ee

Scho

lars

hip

&

Mid

day

Mea

l Be

nefic

iarie

s

Fem

ale

Com

mun

ity

Hea

lth

Volu

ntee

rs

Safe

Mot

herh

ood

ben

efici

arie

s

War

d C

omm

ittee

s/C

hairp

erso

n/Se

cret

ary

Coo

rdin

atin

g in

divi

dual

s at

mun

icip

al le

vel

Serv

ice

Del

iver

y Fa

cilit

ies

Faci

litat

ing

com

mitt

ees/

indi

vidu

als

at fa

cilit

y or

com

mun

ity

leve

l

SSA

Ben

efici

arie

s

War

d O

ffice

s

Lega

l Sec

tion

Educ

atio

n, Y

outh

&

Spor

ts S

ectio

n

Econ

omic

D

evel

opm

ent

Sect

ion

Fina

ncia

l M

anag

emen

t Se

ctio

n

Hea

lth

& S

ocia

l D

evel

opm

ent

Sect

ion

infr

astr

uctu

re

Dev

elop

men

t &

Envi

ronm

ent S

ectio

n

Adm

inis

trat

ion,

Pl

anni

ng &

M

onito

ring

Sect

ion

103


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