Incomplete transfer of funds to province, 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 province and local levels under various headings in the mid 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 Ramchandra Paudel on October 16, the grants intended for province and local levels were transferred only partially. The report highlights this trend has created challenges in the effective implementation of the budget.

The report states that during the fiscal year 2081/82 BS (2024–25 AD), the Commission had recommended the federal government for providing Rs 60 billion to province governments and Rs 88 billion to local governments. Although the allocations were made accordingly, only 91.76 percent of the amount allocated to province 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 province and local levels.

Not only the federal government, but also some of the province governments failed to make the hundred percent transfer of fiscal equalization grants meant for the local levels. The Lumbini Province's transferred just 99.75 percent while Karnali made 98.91 percent transfer. Towards the 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. (RSS)