KATHMANDU, June 24: The government has decided to allocate 93 percent of the Fiscal Equalization Grant (FEG) to local governments. This decision comes just in time for municipalities, rural municipalities and metropolises to finalize their budgets.

According to the Intergovernmental Fiscal Arrangement Act, municipalities must present their budgets by June 24. The recent budget reductions announced by the federal government have led to protests from local governments, which claim these cuts have significantly impacted their budgeting process. In response, the cabinet meeting held on Monday decided to transfer the remaining FEG funds for the fiscal year 2023/24 to the local governments.

After a 93 percent deduction in the current fiscal equalization grant of Rs 87.353 billion, the remaining Rs 16.99 billion will be transferred to the local governments. An additional Rs 22.61 billion will also be sent to the local governments, with about Rs 5 billion remaining from previous allocations.

On January 23, 2024, the federal government decided to reduce the FEG to provincial and local governments by 26 percent. A subsequent cabinet meeting set the maximum limit of the equalization grant at 74.11 percent. Based on this decision, the Financial Comptroller General Office had instructed all district treasury offices to cap the annual grants at 74.11 percent on April 24.

The current year's budget outlines the transfer of Rs 58.67 billion to provincial governments and Rs 87.35 billion to local governments under the FEG, totaling Rs 146.2 billion. In the last fiscal year 2022/23, the final installment of the FEG was reduced by 25 percent.

After facing strong opposition from the local governments, who even threatened to surround Singha Durbar, the federal government revised the decision, increasing the FEG limit from 74.11 percent to 93 percent.

 
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