Govt to release Rs 16.99 billion in equalization grant to local govts

Published On: June 25, 2024 08:20 AM NPT By: Republica  | @RepublicaNepal

Grants for provincial govts remain undecided

KATHMANDU, June 24: The government has decided to provide the local governments with fiscal equalization grant worth Rs 16.99 billion allocated for the fiscal year 2023/24.

Revoking its own decision made earlier, the Cabinet meeting held on Monday decided to release the remaining amount of grants. Showing the shortfall in revenue collection, the federal government had earlier decided not to provide the remaining amounts under the heading.

While announcing the annual budget for the current FY, the government had declared to provide the fiscal equalization grants of Rs 87.35 billion to the 753 local governments. As of now, the government has disbursed only Rs 64.24 billion under the heading.

With the latest decision to provide the remaining amount, the local governments will receive Rs 81.23 billion in total. The amount is still short of Rs 6.12 billion that the government had declared previously.

Although the federal government has released the amounts of grants allocated for the local government, the provincial governments will not get the grant amounts this year. Earlier, the government announced a similar grant worth Rs 57.67 billion to the seven provinces.

According to the Ministry of Finance (MoF), the government was compelled to halt disbursement of the grant amounts after the federal government fell short of its revenue collection target for the current fiscal year. The appropriation bill talks about providing equalization grants to sub-national governments based on the revenue collection by the central government.

According to the MoF officials, the government took the decision not to release the remaining amounts of grant after it was estimated that the revenue collection was likely to be 30 percent less compared to the targeted amount. Until last month, the reserve fund of the federal government stood at a negative Rs 208 billion, while the government will need to manage additional financial liabilities of around Rs 250 billion during mid-June and mid-July, the last month of the fiscal year.

The government came under pressure due to its decision not to release the remaining grant amounts to the sub-national governments. While the sub-national governments warned to launch protests, the lawmakers have been raising this issue frequently in the session of the House of Representatives.

Fiscal equalization grant is one of the four intergovernmental fiscal transfers that the federal government provides to the sub-national governments. The constitution stipulates that fiscal equalization grants should be distributed on the basis of expenditure needs and revenue capacity.

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