Local bodies allowed for budget deficit

Kathmandu, July 13:

The Ministry of Finance (MoF) has allowed the newly elected local bodies to go for a budget deficit.

As the local governments across the country, except for the eight districts in Province 2, are busy preparing the estimates of the income and expenditure of their respective units, the MoF has given a positive nod to spend more than their revenue or grants from the central government.

“The local government can propose a deficit budget if there is a need to implement some projects and programmes,” said Kewal Prasad Bhandari, chief of Budget Division at the MoF, at an interaction on ‘Federal budgeting’, organised by the Society of Economic Journalists-Nepal (SEJON) Thursday.

According to him, the local governments can unveil their budget as per the guidance of the Mid-Term Financial Framework (MTFF), and may propose revenue and programmes separately as practised by the central government.

The budget should be submitted to their respective municipals or rural municipal councils for approval.

The central government had provided an equalisation financial grant of Rs. 100 million to 1.24 billion to the local bodies, and they will get conditional grants for education, health, agriculture and livestock sectors. They have already received Rs. 10 million each to develop the necessary infrastructure to run the local administration.

 The equalisation grant includes the budget for recurrent expenses and economic infrastructure projects that are currently running while the conditional grant is for salary and allowance of staff, teachers and continuation of projects and programmes of the line ministries being implemented in the local units.

Secretary at the Ministry of Federal Affairs and Local Development (MoFALD) Dinesh Kumar Thapaliya said that the local bodies were facing difficulties as they didn’t have any legal framework and manuals for collecting revenue or mobilising the budget.

“We are in the process of developing a legal framework to guide the local governments in estimating the income and expenditures, collecting revenue and other financial activities,” he said.

He stated that the government was organising a 5-day auditing training to enhance the capacity of the local governments.

“As many things are to be settled by the Natural Resources Financial Commission, we have to wait for some time until the laws required for it are passed by the Parliament, and the Commission finds ways for resource management and capacity of the local bodies,” he said.

Federalism expert Dr. Khim Lal Devkota said that there was not much resource mobilisation by the local units as claimed by the government.

He urged the government not to make haste while developing the legal framework to guide the local units in budget formulation and financial mobilisation, and suggested expanding the tax-base instead of the tax-rate.