Kathmandu, Feb 15: The government has reduced grant transfers to provincial and local governments after revenue collection missed targets in the first half of the current fiscal year.
The Financial Comptroller General Office recently directed the Treasury and Auditor offices to trim the third instalment of fiscal equalisation grants.
Under the new decision, sub-national bodies will receive only 20.43 percent of the originally planned third tranche.
The move follows a 95-point budget execution guideline issued by the Ministry of Finance. The guideline ties the third instalment to revenue performance in the first six months, while the fourth instalment will depend on the gap between the annual revenue target and actual collection by mid-April. Similar cuts have been made in recent years.
In the last fiscal year, provincial and local governments received 91.76 percent of their approved annual funds by the fourth instalment. The year before that, half of the third instalment had been withheld.
Weak revenue growth has become a recurring problem, largely linked to the sluggish economy. From mid July 2025 to mid-January 2026, the government collected Rs 581.41 billion, which was 2.5 percent higher than the same period last year but still Rs 129.80 billion short of the half year target of Rs 711.21 billion. The six-month collection accounts for only 39 percent of the annual goal of Rs 1.533 trillion for FY 2025 26.
The national budget earmarks Rs 417 billion for provincial and local governments through equalisation, conditional, special, and supplementary grants.
Of this, Rs 97.56 billion goes to provinces and Rs 320.26 billion to local bodies. Based on the National Natural Resources and Fiscal Commission’s recommendation, the finance ministry has set equalisation grants at Rs 60.66 billion for provinces and Rs 88.97 billion for local governments for the current fiscal year.
People’s News Monitoring Service
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