Nepal’s transition to federalism has been accompanied by an ambitious restructuring of its public financial management (PFM) system. Constitutional mandates, fiscal federalism laws, procurement regulations, and digital financial systems together form a comprehensive governance architecture. Yet, nearly a decade into implementation, persistent weaknesses in budget execution, procurement performance, internal control, and accountability continue to constrain development outcomes, particularly at provincial and local levels. Drawing on recent audit findings, Public Expenditure and Financial Accountability (PEFA) assessments, and PFM reform experiences, this article argues that Nepal’s primary PFM challenge is no longer institutional design but implementation quality. It further posits that public procurement—where public resources are operationalised—remains the most critical transmission point of PFM reform. In this context, the evolving role of the Public Procurement Monitoring Office (PPMO) as an oversight institution, combined with the strategic engagement of the Institute of Chartered Accountants of Nepal (ICAN), offers a credible pathway to close long-standing execution gaps and strengthen fiscal governance in federal Nepal.

Federalisation and the PFM Promise