Fiscal federalism update

The national budget should acknowledge provincial and local governments.

The government will present the budget for Fiscal Year (FY) 2024/25 in a few days. In Nepal’s federal structure, functional responsibilities are devolved to the sub-federal levels while revenue remains centralised. The constitution aims to decentralise revenue through legislation. To achieve this, fiscal transfers to the sub-federal levels are ensured by the constitution. These fiscal transfers are done through four grants: Fiscal equalisation, conditional, special, and matching grants. Among these grants, the fiscal equalisation grant is vital; it is considered unconditional and includes full autonomy to the subnational governments.