Shri Krishna, Joint Secretary of the Ministry of Finance of Nepal, shared an overview of Nepal's country-led financing approach during the FfD4 Third Preparatory Committee side event on ‘INFFs and Country Platforms: Strengthening the Alignment Between Investment Plans and Policy Frameworks’ held on 14 February 2025 at the United Nations Headquarters, New York.
Shri Krishna outlined the nation's strategy for developing a Nepal-specific INFF and Nepal's innovative efforts to mobilize resources from multilateral development banks, align them with country priorities, and explore alternative financing mechanisms. He highlighted the collaborative process with UNDP and other experts to create a framework that reflects the country's realistic approach to SDG financing.
Highlighting the global SDG financing gap, Shri Krishna addressed Nepal's complex financial transition, noting the country's upcoming graduation from Least Developed Country (LDC) status and potential changes in World Bank financing. He emphasized the critical need for innovative resource prioritization, including leveraging domestic resources, international finance, and private capital through innovative instruments.
The full transcript of the speech is attached below:
Good morning, everyone.
It has been a great pleasure to be here in this FfD4 Preparatory Committee meeting, and it's been a series of intense discussions about Nepal's efforts and actions toward SDG financing at the country level, as you rightly mentioned in the background, and also as we heard from the Excellency Minister of Egypt. There is a huge financing gap.
The reality is about $4 trillion US dollars globally. If you look at Nepal, we have more than $5 billion US dollars in funding gaps for SDGs. And that is not simply achievable. So, we need to be innovative in terms of prioritizing resources. That includes domestic resources, international finance, and also leveraging private capital through innovative instruments.
At the same time, we are also thinking of developing a Nepal-specific INFF, and that's in process. We are discussing with experts and agencies, particularly UNDP, to finalize that report so it can reflect the reality and the realistic approach for SDG financing in Nepal. For MDBs, we have been mobilizing most of the resources, aligning them with SDG actions, country priorities, and policies.
So, it's really difficult to evaluate where we stand at this point in time and where we would be by 2030. It's really difficult. But as we are trying our best, we are exploring every possible option, bringing every possible financing together. We try to align them and make our maximum effort to align them with the SDG priorities, so that we can achieve, or at least come close to achieving, the SDGs by 2030.
In the meantime, we have two major developments and country commitments. One is we are graduating from LDC next year. At the same time, we are also moving to a different group in World Bank financing (for example, MDB financing). They basically follow income criteria and operational cutoffs. In this regard, Nepal would be a blended country sometime in the future. So, the cost of development financing could be higher than what we have been enjoying at the moment. Similarly, as we talked about blended finance, innovative financing, alternative financing, going for bond issuance, thematic bonds, colored bonds, SDG bonds...
We are not initiating these at the moment, but we have been trying to build institutions and find the right policies so we can consider those options as well. In this area, the role of UN agencies comes to the forefront. We have been collaborating with the INFF expert team, together with MDB experts, so that Nepal can issue these bonds and channel the resources appropriately.
Simply, that is not achievable. It's huge. At the same time, the debt servicing cost...
Nepal is among the low level of debt distress countries. Among the LDCs, we are at quite a comfortable level of stress. But that does not mean that we don’t face debt servicing stress. Because we have been servicing debt at a huge cost, sacrificing several other expenditures. This means compromising social sector expenditures, health, education, and infrastructure financing.
We have been compromising those immediate development priorities to continue debt servicing. That means we have to look into restructuring debt, and how we can better schedule debt repayment so that it is rightly reflected in our outcome document. How can we restructure the entire debt stock so that the country can benefit from the restructuring and free up resources to finance the SDGs? That part is essential, and we are reinforcing and emphasizing this to the bilaterals and multilaterals, to what extent they can be supportive of this.
Then finally, policy support and development policy credits – fungible resources, budget support – that gives the country much more flexibility to allocate resources to the country’s priority SDG actions. That is also crucial, but for that as well, we need clarity on which sector, which reform, or which area can deliver results, and how we can make it financially viable by bringing together those reforms and resources.
Financial viability is something we need to be very careful about at this point in time. Otherwise, maximizing resources is one part, but deciding where to allocate them and what we can achieve with those resources is crucial. Otherwise, the sustainability of the development goals might be achieved, but the sustainability of financial and fiscal management could be at risk.
We have to balance all these – prudent fiscal management, fiscal constraints – so that debt management, debt sustainability, SDG financing, private capital, policy reforms, country readiness, institutional readiness, and policy clarity are brought together.
FDI is another important part for us, but we are quite below the average in South Asia when it comes to attracting FDI. It would not simply come to us. We need to attract it. We need to create a conducive environment for FDI. We need to offer a lot of attractions and incentives so that they perceive Nepal as an attractive destination.
This is what we need to find altogether. We don’t have a simple solution.
To conclude, I would also like to reinforce and emphasize that our collaboration should move forward, with UN agencies taking the lead after FfD4. FfD4 should not just release an outcome document. It has to have a very concrete monitoring criteria, quantitative targets to set, and then take the lead, with ownership and guardianship of the FfD4 outcome document's implementation.
In this part, I think the country can benefit, and we can continue our collaboration with the UN, MDBs, international financiers, domestic banks, and, more importantly, enhance domestic resources to ensure the achievement of SDGs alongside the fiscal and financial sustainability of the country.
Thank you very much.