Treasury cuts conditional subsidies allocated to local governments

Sub Levels

Government faces Rs 181 crore shortfall to manage financial debt, adopts austerity measures

Kathmandu, April 3: The Ministry of Finance (MoF) has reduced the amount of conditional subsidies granted to state and local governments. It’s a time when the federal government itself is struggling to manage expenses while revenues are low.

Last week, Finance Minister Toyam Raya asked relevant authorities to freeze Rs 240.89 billion allocated to local governments. Of the amount, Rs 57.17 billion was allocated to his seven provinces and the rest of his Rs 183.72 billion was allocated to the provincial level for the current financial year. Last year, the budget allocated under this heading at the local level alone was Rs 173.49 billion.

Conditional grants are designated for specific purposes identified by the government under national policies and programs, but the allocated funds cannot be used for another project. The government will transfer funds at the local level for projects implemented through the mobilization of foreign aid through this mechanism.

The Treasury Department paid conditional subsidies in four installments each year: mid-August, mid-October, mid-January and mid-April. This year, the Ministry of Finance has been tasked with releasing his 60 million rupees from the last installment under this heading.

At present, the state and local levels are earning notable sums under conditional headings. Once the new regulations come into force, local governments will be able to receive conditional grants based on need and see progress in the conditional programs they run.

Last month, the National Natural Resources Finance Commission recommended that the government cut some conditional subsidies from the annual budget. The committee proposed the needed funding through financial equalization grants rather than conditional grants.

The government has adopted austerity measures to limit the growing fiscal imbalance. The government spent 836 billion rupees this year, but the total revenue was only 655 billion he. This points to her Rs 181 billion deficit in the national coffers, making the government more reliant on domestic borrowing to finance its financial debt.

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