KATHMANDU: The government has initiated the process to dissolve the three-decade-old Town Development Fund Act, 2053, and establish a new Infrastructure Development Fund with an authorized capital of Rs 100 billion.

The move aims to boost investment in urban infrastructure across the country. The Ministry of Infrastructure Development has drafted a bill for the new fund, which has already received theoretical approval from the Council of Ministers.

Under the proposed framework, the ownership of the fund will be expanded to include the federal, provincial, and local governments, as well as national and international financial institutions. The Ministry of Finance has already granted consent for the Rs 100 billion authorized capital.

The government stated that the existing Town Development Fund is inadequate for the federal structure as its capital structure lacks clarity and its ownership is limited solely to the central government. With urban population reaching approximately 59 percent following the formation of local levels, the demand for infrastructure investment has surged. International studies suggest that Nepal requires over Rs 2.33 trillion annually for urban infrastructure development.

Once the new law is enacted, the fund will be empowered to raise capital from domestic and international markets by issuing bonds and debentures. It will also be authorized to invest in infrastructure companies and provide blended financing at concessional interest rates.

This restructuring is a mandatory condition for receiving a $200 million policy-based concessional loan from the Asian Development Bank. The proposed legislation is modeled after successful international institutions like India’s HUDCO and the BNG Bank of the Netherlands, incorporating clear provisions for governance, management, and auditing.