At a time when there is a severe shortage of resources for large-scale projects, the government is preparing to establish an Alternative Resource Management Fund with an authorized capital of Rs 100 billion, enabling private sector participation in investment. According to the draft bill prepared by the government, the fund is being created to allow the private sector to contribute to the development of infrastructure projects, including power generation, transmission and distribution, roads, railways, airports, and tunnels. The fund's paid-up capital will be Rs 25 billion.

The government plans to invest in infrastructure such as special economic zones (SEZ), industrial parks, dry ports, information technology parks, and cable cars. The fund, which includes participation from the private sector, will facilitate investment in these areas.

Entities such as insurance companies, international financial institutions, foreign banks or financial institutions, Employee Provident Fund, Citizen Investment Trust, and Social Security Fund will be allowed to invest in the proposed fund. The government will hold a 51 percent share, while Pension Fund’s management institutions, Employee Provident Fund, Citizen Investment Trust, and Social Security Fund will jointly hold 25 percent stake. Insurance and reinsurance companies will hold the remaining 24 percent.

Finance Minister Bishnu Prasad Poudel had approved the work procedures related to alternative finance upon assuming office on June 25. The budget for the current fiscal year (FY) 2024/25 also states that the government will seek alternative sources of investment. It mentions that development assistance will be mobilized through a blended finance approach, combining commercial, private, non-governmental funds, grants, and concessional loans.

International organizations such as the World Bank and the Asian Development Bank (ADB) may contribute to the fund through low-interest loans, grants, or guarantees.

The Ministry of Finance is preparing to implement projects through the fund. The government has been facing challenges in raising investment for infrastructure development due to a reduction in grants from donor agencies. In response, officials say the government aims to establish the fund to encourage private sector involvement in infrastructure development.

Shyam Prasad Bhandari, Joint Secretary at the Ministry of Finance, stated that a draft law for the Alternative Resource Management Fund has been prepared and submitted to the Office of the Prime Minister and Council of Ministers. According to him, the legislative process will begin once the Council of Ministers approves the bill. The fund will become operational after the law is enacted. A government source confirmed that the matter was discussed during Monday’s Cabinet meeting.

The fund is proposed to have a seven-member board of directors, consisting of six members from the promoter investors and one chief executive officer. The board will be led by either the Finance Minister or the Finance Secretary. The fund will raise capital for specific projects and invest in human resources and equipment.

Officials state that the funds mobilized through alternative finance will be used to identify, study, develop, construct, and implement projects that generate employment, provide significant economic returns, and contribute to the growth of the gross domestic product (GDP).