Incomplete transfer of funds to provincial and local levels affects budget implementation: Fiscal Commission

KATHMANDU, Nov 1: The implementation of the overall budget has been affected by the cut-off in grant-based funds allocated for provincial and local levels under various headings in the middle of the fiscal year by the federal government.

According to the seventh annual report of the National Natural Resources and Fiscal Commission, presented to President Ram Chandra Paudel on October 16, the grants intended for provincial and local levels were transferred only partially. The report highlights that this trend has created challenges in the effective implementation of the budget.

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The report states that during the fiscal year 2081/82 BS (2024–25 AD), the Commission had recommended the federal government provide Rs 60 billion to provincial governments and Rs 88 billion to local governments. Although the allocations were made accordingly, only 91.76 percent of the amount allocated to provincial governments and 91.74 percent of that allocated to local governments were actually transferred. This shows that provincial and local governments did not receive the full funds announced as grants by the federal government.

The report further notes that the failure of the federal government to transfer the fiscal equalization grants as recommended and appropriated has affected budget implementation at both the provincial and local levels.

Not only the federal government, but also some provincial governments failed to make the full transfer of fiscal equalization grants meant for the local levels. Lumbini Province transferred just 99.75 percent, while Karnali made a 98.91 percent transfer. Toward fiscal equalization, both provinces had allocated Rs 950 million.

Moreover, the report adds that the federal government and provinces have not provided data on conditional grants to the Commission.

In addition, some local levels have failed to comply with legal provisions while taking loans from the Town Development Fund. During fiscal year 2081/82 BS, 16 local levels obtained loans totaling Rs 371.09 million from the Fund. Some of these local governments borrowed without including internal borrowing estimates in their annual budgets, while others borrowed amounts exceeding the ceiling recommended by the Commission.