Conditional grants given to local governments are reduced by finance ministry

KATHMANDU: The Ministry of Finance (MoF) has reduced the amount of conditional grants that were being given to the local and provincial governments at a time when the federal government is finding it difficult to control its expenses in light of the weak revenue collection.

Toyam Raya, the finance secretary, requested last week that the authorities concerned halt spending on the subnational governments totaling Rs. 240.89 billion.

The remaining amount, Rs 183.72 billion, was allocated for local levels in the current fiscal year, leaving Rs 57.17 billion for seven provinces. The budget set aside for the local levels alone in the previous fiscal year was Rs 173.49 billion. .

Conditional grants are only allowed to be used for the purposes specified by the government under its National Policies and Programs. Through this mechanism, the government distributes funds locally for projects that are supported by the mobilization of foreign aid. .

Every year, in the middle of August, October, January, and April, the MoF has paid out the conditional grant amount in four installments. Out of the final installment under the heading, the MoF has been given 60 million rupees to release this fiscal year. .

Provinces and local governments have been receiving a sizeable amount of money as of late under conditional headings.

The new rule will enable sub-national governments to receive conditional grants based on their needs and the success of the conditional programs they manage.

The government should decrease the amount of conditional grants in the annual budget, the National Natural Resources and Fiscal Commission also suggested last month. Instead of a conditional grant, the commission has suggested using a fiscal equalization grant to provide the necessary funds. .

The government has enacted austerity measures, citing the need to stop the escalating budget imbalance. In contrast to its total receipts of only Rs. 655 billion, the government spent Rs. 836 billion this year.

This reveals a Rs 181 billion deficit in the state coffers, forcing the government to rely more on domestic borrowing to meet its financial obligations.