Multi-year contract guidelines revised: projects at risk of automatic cancellation if delayed beyond April

KATHMANDU: The Government of Nepal has implemented revised guidelines on multi-year contract agreements, announcing that such projects will face automatic cancellation if not finalized by April of the fiscal year. This update, published in the official gazette and issued by the Ministry of Finance, aims to enhance project accountability, improve financial discipline, and ensure timely completion of public infrastructure and development projects.

The “Multi-Year Contract Consent Guidelines 2081” outline specific requirements, including a provision for projects with budget consent to start the procurement process by January of the fiscal year. Projects that fail to complete the contracting process by April will automatically lose budgetary approval, a move designed to streamline project implementation and prevent delays that have plagued several high-priority projects in Nepal. Deputy Secretary and Ministry of Finance spokesperson Mahesh Bhattarai noted that these new regulations address past inefficiencies, stating, “We have made significant improvements this year to avoid last year’s challenges, which required multiple amendments.”

Tightened Timeframes and New Fiscal Requirements

Under the revised guidelines, multi-year contracts with budget consent must adhere to stricter timelines. Previously, the regulations required contract agreements to be finalized within nine months of the fiscal year, with procurement processes initiated by mid-November. The updated guidelines now mandate an accelerated process, with projects requiring signed agreements by April. This change reflects the government’s push to improve execution rates for national infrastructure projects and prevent resource backlogs.

Additionally, the Ministry of Finance has stipulated that budget consent for multi-year contracts will only apply to the portion of costs borne by the Government of Nepal, particularly for projects funded through co-financing. For projects still in the contract evaluation phase, this timeframe will not apply, allowing them additional flexibility. However, Bhattarai emphasized that only high-priority, strategically significant projects should seek budget consent under the multi-year guidelines to ensure resources are directed to essential initiatives.

Impact on National and Non-National Pride Projects

The guidelines distinguish between national pride projects and other infrastructure initiatives, specifying that the duration of budget consent for non-national pride projects will not exceed three fiscal years. National pride projects, which are considered essential for the country’s development goals, will continue to receive priority funding and budget support. For all other projects, however, ministries and agencies will be expected to allocate budget within estimated fiscal limits, ensuring any surplus is reserved for newly prioritized projects.

Strengthened Monitoring and Evaluation

The revised guidelines also introduce more robust monitoring and evaluation mechanisms. The National Planning Commission, alongside relevant ministries and agencies, will oversee projects that receive budget consent. In addition, ministries are required to update annual information on approved multi-year contracts in the National Project Bank Management Information System and in specific ministry-level budget systems. This improved data tracking aims to prevent redundant allocations and ensure transparency.

When submitting annual budget proposals, ministries must include a mandatory fund allocation for any project with multi-year contract consent. “This requirement ensures that multi-year projects receive the necessary budget support each fiscal year to prevent stagnation and maintain momentum,” explained Bhattarai.

Funding Flexibility for Essential Projects

An important feature of the guidelines allows the Ministry of Finance to grant budget consent up to four times the initial allocation for non-national pride projects, providing increased financial flexibility. Additionally, projects that cannot be completed in phases or that risk substantial national losses if left incomplete will be exempt from this budget limit, ensuring that critical infrastructure initiatives are not hindered by funding caps.

Immediate Implementation

The new guidelines, effective immediately, are expected to have a significant impact on the pace and quality of Nepal’s infrastructure development. By setting stricter timelines, enhancing oversight, and establishing clear budget parameters, the Ministry of Finance aims to foster more efficient project execution. These adjustments reflect the government’s commitment to bolstering Nepal’s economic growth through improved infrastructure planning and resource management, aligning with broader goals of enhancing public services and national pride in development projects.