Government Funds Hold Over Rs 40 Billion as Mismanagement Risks Emerge: Study Calls for Urgent Reform

A government study has uncovered that more than Rs 40 billion remains parked across ten different employee-related funds managed by public institutions—raising concerns about financial discipline, transparency, and future liabilities. These funds, originally created to cover retirement, medical benefits, gratuity, and risk protection for employees, have grown into massive reserves, but the absence of centralized oversight has now become a matter of national financial debate.

According to the report, public institutions have been collecting contributions from employees and receiving additional support from the government to maintain these welfare funds. However, instead of keeping these reserves strictly for retirement and medical obligations, several institutions have been using them for unrelated expenditures. The study warns that such practices could jeopardize the government’s ability to meet future liabilities when large numbers of employees retire.

The most alarming figure appears in the account of Rastriya Banijya Bank, which alone holds Rs 25.71 billion—over half of the total fund amount. This massive accumulation highlights not only the size of the institution but also the lack of coordinated financial policy guiding how such funds should be maintained. Agricultural Development Bank, another government-backed financial institution, follows with Rs 12.20 billion, reflecting similar structural issues in fund management.

Other public institutions also possess significant balances: Nepal Airlines Corporation holds Rs 610 million, Public Service Broadcasting Nepal has Rs 420 million, and the Deposit and Credit Guarantee Fund maintains Rs 389.5 million. Similarly, the Nepal Tourism Board, Securities Board of Nepal, and several water-supply agencies collectively hold billions more. These numbers reveal that what appears to be a fragmented system of employee welfare funds has now evolved into a sizable portion of the public financial ecosystem.

Experts say these funds were created with good intentions—to guarantee employee security and reduce pressure on the national treasury. But over time, weak regulatory frameworks, poor monitoring and self-managed structures have opened the door for misuse. The government report explicitly mentions that several institutions have diverted funds for purposes unrelated to employee welfare, which could result in a financial crisis when actual retirement payments are due.

The concern is not just about the size of the funds, but about the risks created by mismanagement. If institutions continue to use these reserves in an unmonitored manner, Nepal could face a situation where large liabilities emerge suddenly, without any secure funding mechanism to support them. This could place additional strain on the national budget and force the government to divert resources from development priorities.

Furthermore, economists warn that such internal funds may create distortions in public finance. With billions sitting idle without productive use, the country loses potential economic benefits. At a time when Nepal’s economy is already burdened by weak liquidity, slow growth and falling investor confidence, locking away such massive resources without oversight could worsen fiscal instability.

The study has therefore recommended establishing a unified regulatory mechanism to monitor, audit and standardize all employee-related funds. It also calls for stronger laws to prevent diversion of welfare funds into other operational expenses. Reform, the report suggests, is not only necessary but urgent—especially as Nepal prepares for increasing retirement obligations in the coming decade.

The findings have sparked discussions within policy circles about how public institutions should handle employee welfare obligations in the long term. As Nepal’s bureaucracy expands and restructuring continues, the government faces a critical question: Should employee funds be centrally managed to ensure accountability, or should institutions retain autonomy despite growing risks?

For now, what is clear is that the billions accumulated in these funds represent both an opportunity and a threat. With proper oversight, these reserves could secure employee welfare for years to come. But without immediate reform, they could become a financial burden that destabilizes Nepal’s already fragile public finance.