Capital spending continues to challenge government

Gen Z protest, petroleum price hike blamed

 

Kathmandu, July 4

The current Fiscal Year 2025/26 witnessed disastrous moments with demonstrators burning down national heritages and private sector establishments during the Gen Z movement in September last year. Death of 76 people and political confusion caused a panic among the public while investors postponed or cancelled their business ventures. Economic prospects plummeted. Hopes for prosperity vanished.

However, despite doubts, fears and conspiracy theories, the country successfully held the general elections within the announced time and people felt the country has now been brought on track. Public opinion changed, so did the government.

The year saw three finance ministers – Bishnu Prasad Paudel, Rameshore Prasad Khanal and Dr. Swarnim Wagle. Paudel was the political architect of the CPN-UML, albeit without any experience or expertise in the sector, while Khanal was a technocrat with an expertise in economic affairs, and Dr. Wagle is an internationally known economist who had worked with the World Bank, UNDP and National Planning Commission of Nepal, among others.

Although Paudel was ousted by the movement within two months of this fiscal and the economy was managed by two senior economists – Khanal and Dr. Wagle, budget mobilization remained pathetic with capital spending remaining the lowest in the recent times.

According to the statistics from the Financial Comptroller General Office (FCGO), the government could mobilise only Rs. 146.7 billion of the Rs. 407.88 billion capital allocation by Thursday, July 2. This is just 35.97 per cent of the total allocation.

Economist Dr. Dilli Raj Khanal said that this is collective failure of the government and leaders. "It is disheartening to see the government fail to bring about programmes and measures to boost economic activities and morale of the investors and consumers," he said.

Dr. Khanal maintained that the aftermath of economic crisis demands both short-term and long-term measures to revitalise the economic and business activities which both the transition and current majority government failed to implement.

However, spending has significantly gone up recently, with the government mobilising Rs. 19.7 billion on Thursday and Rs. 8.7 billion on Wednesday. Even if the government continued this spending spree for the remaining days of the fiscal year, total spending is likely to remain around 80 per cent while the development expenditure could be lower than 45 per cent.

However, the Ministry of Finance (MoF) maintained that a few large payments to the contractors and other liabilities could increase this spending up to 50 per cent. For instance, development expenditure on Wednesday was Rs. 1.15 billion and on Thursday Rs. 1.48 billion.

Although, two weeks remain before the conclusion of this year, the government could disburse the payments only up to July 9, as provisioned by the Economic Procedures and Fiscal Accountability Act and bylaws. After that the payment systems like Financial Treasury Controllers Offices and online payment channels freeze.

 

A trend in failure

While the MoF officials cited Gen Z movement for the disturbances in budget mobilisation, statistics show that it is not the one-time failure but has become a trend. During the same period, with two weeks of the year remaining, in FY 2024/25, about 75 per cent budget was mobilised while the capital expenditure stood at 46.6 per cent (Rs. 164.15 billion of Rs. 352.35 billion).

But total capital expenditure reached 81 per cent by the end of the FY 2024/25 which supports the claims of the Finance Ministry that such spending can reach 50 per cent.

In 2023/24, Rs. 146.7 billion (48.57 per cent) of Rs. 302 billion could be mobilised during the corresponding period while such expenditure was 44.82 per cent (Rs. 170.5 billion of Rs. 380.38 billion). In 2020/21, the year when the COVID-19 hit hard the lives and economy, capital expenditure remained around 46 per cent during the same period.

Meanwhile, recurrent expenditures have remained identical (70 to 74 per cent) in the past five fiscal years.

Likewise, budget revision has also become a trend in the past several years with every finance minister downsizing their budget during the mid-term review. Finance Minister Khanal couldn't remain exception. He slashed the annual budget target to 85.96 per cent or Rs. 1688.3 billion from Rs. 1964.1 billion.

Minister Khanal had presented the unusual situation created by the Gen Z movement, and the Cabinet's decision to reprioritise projects, as well as austerity measures to reduce expenditures as the reasons for budget downsizing. The government also said that it had to manage funds for the general elections and relief to the families of those injured and killed in the protests from the existing framework. 

By mid-January this year, only 12 per cent of the budget earmarked for development works was utilised.

 

Reforms impact spending

The transitional government led by Prime Minister Sushila Karki suspended small projects worth Rs. 119.5 billion because they were unprepared and unproductive.

Then Energy Minister Kulman Ghishing scrapped 58 non-performing and sick construction contracts from 312 such projects.

FM Khanal said then that the government's priority was to enhance 'expenditure efficiency' and 'execution efficiency' in public finance management so the government wanted to reallocate resources to transformative and strategic projects. This reform move reduced the mobilisation of the fund and caused a brief panic in the construction industry.

Meanwhile, the soaring prices of petroleum products including diesel and bitumen, and steel forced the contractors to pause the construction of the public projects. According to the Federation of Contractors Association of Nepal (FCAN), petroleum products' price increase pushed the project cost by 30 to 40 per cent, making it impossible for the contractors to continue with the previously agreed amount.

Spokesperson of the MoF Amrit Lamsal said that the surging price of the petroleum products significantly impacted the development projects. "Several government offices including that of the local governments were damaged during the Gen Z movement which obstructed or delayed the implementation of development works," he said.

Similarly, during the period of the transition government, the focus of the entire government and its agencies was on holding the elections successfully, according to Lamsal. But he maintained that the authority given to the line ministries for budget transfer without coming to the Finance Ministry for approval couldn't prove effective due to the obstacles created by the soaring fuel prices.

Economists say that the entire mechanism for budget mobilisation needs an overhaul. Responding to this recommendation, FM Dr. Wagle had further simplified the budget disbursement process and said that from the first day of the FY 2026/27, line ministries can initiate the development works and they don't need additional approval from the Finance Ministry for it.

Revenue collection on track

The government revenue collection has hovered around 75-76 per cent, until July 2, this year and previous year. Targets for this is Rs. 1480 billion while it was Rs. 1419.3 billion for last year.

So far, Rs. 1128.2 billion revenue is collected which includes Rs. 1024.4 billion tax revenue and Rs. 103.8 billion non-tax revenue.

While revenue collection remained somewhat satisfactory, government could never meet the targets set for the grants. This year the achievement has remained at 11.87 per cent of Rs. 53 billion while it was 38.11 per cent (highest in the past five years) of Rs. 52.3 billion. In 2022 and 2023, realisation of the targets for grants remained below 10 per cent.

Meanwhile, the provincial governments have also failed to meet their revenue and expenditure targets. By mid-May 2026, seven provincial governments could spend Rs. 88.53 billion and mobilised revenue of Rs. 163.74 billion.

According to the statistics published by the Nepal Rastra Bank, the total resource mobilisation of provincial governments, by mid-May, including grants and revenue transferred from the federal government, amounted to Rs. 122.25 billlion, and province revenue and other receipts amounted to Rs. 41.42 billion.

The seven provinces' cumulative budget for this fiscal is Rs. 287 billion. 

Published in The Rising Nepal daily on 5 July 2026.       

Centre questions 23 local govts for budget delays

Kathmandu, July 1

The federal government has sought clarification from 23 local governments that failed to present their annual policy, programme and budget for the Fiscal Year 2026/27 within the stipulated deadline.

Ministry of Land Management, Cooperatives, Federal Affairs and General Administration has sent official letters to the concerned rural municipalities and municipalities on Wednesday to submit a detailed explanation outlining the current status of the budget preparation process and the reasons for the delay.

The local governments are asked to submit their response within three days.

Under the Local Government Operation Act, 2017 and the Intergovernmental Fiscal Arrangement Act, 2017, local governments are legally required to have their revenue and expenditure estimates (budget) for the forthcoming fiscal year approved by the executive and presented to the local assembly by 24 June (10 Ashadh), with final approval to be completed by mid-July.

The Ministry said that, based on information entered into its online portal and reports it has received, a few local governments have not yet presented their budget for the FY 2026/27 within the timeframe prescribed by law, prompting the request for clarification.

The letter from the Federal Affairs Ministry also asks local governments to specify the current stage of the budget preparation process, explain why they were unable to present the budget to the assembly within the prescribed deadline, and indicate whether any additional coordination or facilitation from the Ministry is required. The requested information should also be submitted within three days of receiving the letter.

In addition, the Ministry has requested local governments to provide the schedule of forthcoming meetings of their assemblies to help ensure that the budget can be endorsed by mid-July.

The Ministry said the initiative is intended to ensure that the budget preparation process at the local level is completed on time and that the legal provisions governing the process are fully implemented.

Published in The Rising Nepal daily on 2 July 2026.      

Metropolitan Cities unveil budget for FY 2026/27

Kathmandu, June 24:

Six metropolitan cities in Nepal have announced their budget for the Fiscal Year 2026/27. As per the constitutional provision, all local bodies should announce the budget for the next year by Asar 10, June 24 for this year. Most of the sub-metropolitan cities, municipalities and rural municipalities also announced budgets with regular and innovative programmes and projects.

The local bodies have largely depended on the federal grants for their development works, and even for the recurrent expenditures.

Lalitpur: Rs. 7.48 billion

Lalitpur Metropolitan City has unveiled a budget of Rs. 7.48 billion for the upcoming fiscal year 2026/27.

Deputy Mayor Manjali Shakya presented the annual income and expenditure estimates of the metropolis at the 9th Municipal Assembly on Wednesday.

The budget for the next fiscal year is slightly higher than the budget presented for the current fiscal year. The metropolis had allocated Rs. 7.47 billion for the fiscal year 2025/26.

The metropolis has proposed an allocation of Rs. 3.25 billion for recurrent expenditure, emphasising prudent, transparent, and justified public spending. The allocation for recurrent expenditure is 9 per cent higher than that of the current fiscal year.

Meanwhile, around Rs. 4.24 billion has been set aside for capital expenditure. This is lower than the Rs. 4.51 billion allocated in the current fiscal year, reflecting a reduction of about Rs. 270 million, or 6 per cent.

It is estimated that Rs. 3.35 billion will be collected from internal sources, including internal revenue, land revenue, entertainment tax, and other taxes. In addition, Rs. 60 million is expected to be mobilised through public participation in development projects.

The metropolis expects to receive Rs. 1.36 billion from the federal government and Rs. 176.39 million from the provincial government under various grants and revenue-sharing arrangements.

Under intergovernmental transfers and delegated programmes, the metropolis anticipates receiving Rs. 1.06 billion.

A further Rs. 1.47 billion required to finance the proposed budget will be covered through available cash reserves.

Presenting the budget, Deputy Mayor Shakya said that priority has been given to institutional strengthening, sustainable urban development, employment generation, and heritage preservation.

Among the top priorities are institutional strengthening and good governance, with a focus on improving accountability, transparency, and the effectiveness of municipal administration.

The city has also emphasised sustainable infrastructure and urban development to support planned urbanisation and improve civic amenities.

The budget has set a target of ensuring access to clean drinking water for every household, expanding the use of technology, and delivering citizen-friendly, accountable, and technology-driven public services.

Birgunj: Rs. 4.42 billion

Our Parsa correspondent Dipak Gautam adds: Birgunj Metropolitan City has unveiled a budget of Rs. 4.42 billion for the fiscal year 2026/27 prioritising infrastructure development, education, and healthcare services.

Municipal Executive Member Jagat Sah Kanu, on behalf of Acting Mayor Imtiyaj Alam, presented the budget at the 20th Municipal Assembly on Wednesday.

The new budget for the next fiscal year is Rs. 730 million higher than the budget for the current fiscal year 2025/26.

Of the total budget, about Rs. 2.40 billion (54.3 per cent) has been allocated for recurrent expenditure, while Rs. 1.97 billion (44.6 per cent) has been earmarked for capital expenditure.

Likewise, Rs. 50 million (1.1 per cent) has been allocated for financial management.

To finance the budget, the metropolitan city expects to receive Rs. 1.98 billion through federal fiscal transfers, Rs. 1.48 billion from internal revenue, and Rs. 246.88 million through federal revenue sharing.

In addition, Rs. 50 million will come from provincial fiscal transfers, while Rs. 16.7 million is expected through provincial revenue sharing.

The city also plans to generate Rs. 450 million from land registration fees and utilise Rs. 46.9 million from the previous year's cash balance.

Furthermore, Rs. 150 million will be secured from the Town Development Fund to support the implementation of various development projects and programmes outlined in the budget.

During the assembly, Acting Mayor Alam also presented the municipality’s annual policies and programmes.

Alam said that education and healthcare services, urban sanitation management, forest and environmental conservation, agriculture, tourism and industry promotion, quality physical infrastructure, and technology-based public service delivery are the major priorities of the new budget.

The metropolis has allocated Rs. 890.6 million for an Integrated Drinking Water and Sewerage Management Project while Rs. 150 million is allocated for the development of an integrated solid waste management system.

Similarly, Rs. 130 million has been earmarked for the reconstruction of the metropolitan administrative building and ward offices in Ward Nos. 10, 14, and 26, which were destroyed in a fire during the Gen Z movement.

 

Biratnagar: 3.56 billion

Meanwhile, our Biratnagar correspondent Shashidhar Parajuli adds: Biratnagar Metropolitan City has unveiled a budget of Rs. 3.56 billion for the Fiscal Year 2026/27.

Presenting the policies, programmes and budget at the metropolitan city's 18th Municipal Assembly, Deputy Mayor Shilpa Niraula Karki said priority had been given to social development and technology alongside physical infrastructure.

The metropolitan city has allocated Rs. 762.87 million for recurrent expenditure, stating that the major portion of the budget has been focused on development works and social security.

For the upcoming fiscal year, the metropolis has set a target of collecting Rs 1.27 billion from internal sources.

It is estimated to receive Rs. 334.3 million through fiscal equalisation grants from the federal government, Rs. 732.9 million through conditional grants and Rs. 5.6 million in capital grants.

Deputy Mayor Karki said the provincial government would provide Rs. 36.25 million in equalisation grants and a total of Rs. 142.674 million through other grants.

The budget has outlined new initiatives in the field of information technology. Under social development, funds have been allocated for the concept of ‘Mega Schools’, capable of accommodating between 5,000 and 10,000 students, and for the operation of ‘booster classes’ aimed at supporting academically weak students.

In the health sector, Biratnagar aims to be a fully institutional delivery metropolis, where free portable ultrasound scans and ANC profile tests will be provided to pregnant women.

Likewise, at the infrastructure front, the metropolitan city has allocated Rs. 435.632 million for ward-level projects. Rs. 150 million has been earmarked for flagship projects and multi-year contracts, Rs. 100 million for maintenance works and Rs. 10 million for a matching fund.

Bharatpur: Rs. 5.51 billion

Earlier, on Monday, Bharatpur Metropolitan City unveiled a budget of Rs. 5.51 billion for the FY 2026/27. The size of next year’s budget is larger by about Rs. 3 million against that of this year’s budget.

Acting Mayor Chitrasen Adhikari presented the budget at the metropolis’ 19th Municipal Assembly.

For the next fiscal year, the metropolis has projected Rs. 2.04 billion in internal revenue, including proceeds from land registration and the sharing of royalties from mines and mineral resources. It expects to receive Rs. 2.17 billion through intergovernmental fiscal transfers from the federal and provincial governments, Rs. 331.2 million from the federal revenue-sharing mechanism, and Rs. 134 million from revenue sharing by the Bagmati Provincial Government.

Other projected sources of income include Rs. 40 million from the Town Development Fund, Rs. 30 million through public participation, Rs. 745 million in bank balances, and Rs. 19.3 million from the Road Board Nepal.

The metropolis has estimated expenditure of Rs. 1.25 billion under intergovernmental delegated authority and social security schemes.

It has allocated Rs. 600 million to complete projects left unfinished in the previous and current fiscal years and to clear outstanding payments.

Likewise, Rs. 140 million has been allocated for the Gautam Buddha Cricket Stadium, while Rs. 90 million has been set aside for ongoing construction work, and Rs. 117.5 million for education-related programmes.

Pokhara: 7.15 billion

Similarly, Pokhara Metropolitan City presented a budget of Rs. 7.15 billion for the upcoming fiscal year 2026/27. Deputy Mayor Manju Devi Gurung tabled the budget during the 19th municipal assembly on Friday.

Of the total allocation, 55 per cent has been set aside for recurrent expenditure, while 45 per cent is allocated for capital expenditure, according to the budget statement. The metropolis is expected to receive Rs. 3.18 billion in fiscal transfers from the federal government.

This includes Rs. 2.61 billion in conditional grants, Rs. 55 million in special grants, Rs. 18.2 million in equalisation grants, and Rs. 49.37 million in supplementary grants.

From the provincial government, the metropolis is projected to receive Rs. 91.54 million in total financial transfers, including Rs. 81.536 million in equalisation grants, Rs. 6 million in supplementary grants, and Rs. 4 million in special grants from Gandaki Province.

In terms of revenue sharing, the metropolis has estimated Rs. 343.47 million from the federal government, Rs. 40.9 million from provincial sources, and Rs. 1.31 billion from local revenue sharing. It is projected that Rs. 2.48 billion will be received from internal sources.

Kathmandu: 25.88 billion

Likewise, Kathmandu Metropolitan City (KMC) announced a Rs. 25.88 billion budget for fiscal year 2026/27, on Thursday, June 18. It prioritised infrastructure, environment, education, good governance, employment and heritage conservation.

Acting Mayor Sunita Dangol presented the budget at the 19th Municipal Assembly. Of the total amount, Rs. 25.13 billion will come through the municipal consolidated fund and Rs. 750 million from external liabilities. KMC expects Rs. 20.18 billion from internal revenue and bank balance and Rs. 4.93 billion from federal and provincial grants and revenue sharing.

Infrastructure received the largest allocation of Rs. 15.31 billion, followed by office operations and administration with Rs. 4.71 billion. Social development has been allocated Rs. 2.42 billion, good governance Rs. 2.13 billion and economic development Rs. 541.8 million.

Major allocations include Rs. 2.53 billion for heritage conservation, Rs. 1.71 billion for education, Rs. 1.22 billion for environmental management, Rs. 700 million for health services, Rs. 430 million for greenery promotion, Rs. 410 million for information technology and Rs. 360 million for disaster management.

The city also announced tax incentives, including discounts for new taxpayers and reduced rental tax rates.

Published in The Rising Nepal daily on 25 June 2026.   

Provinces show wide economic disparities

Bagmati alone to contribute 38% to national economy

Bagmati’s per capita GDP to remain at US$ 2,644 while Madhes to stay at US$934

 

Kathmandu, May 20

Among the seven provinces of Nepal, Bagmati alone is estimated to contribute more than one-third (36.7 per cent) to the national economy in the current Fiscal Year 2025/26.

According to the statistics published by the National Statistics Office (NSO) on Wednesday, there is a stark disparity among the provinces in terms of the size of economy, contribution to the national economy and per capita Gross Domestic Product (GDP).

Bagmati is projected to contribute Rs. 2.42 trillion to the national economy, which is estimated to reach Rs. 6.6 trillion by the end of this year.

Karnali will make a nominal contribution with just 4.2 per cent or Rs. 277 billion, while Sudurpaschim’s input will stand at Rs. 464 billion (7 per cent).

Likewise, Koshi will contribute Rs. 1.043 trillion (15.8 per cent), Lumbini Rs. 937 billion (14.2 per cent), Madhes Rs. 863 billion (13.1 per cent), and Gandaki Rs. 593 billion (9.0 per cent).

According to preliminary estimates for FY 2025/26, Bagmati is expected to record the growth rate of 5.40 per cent – the highest annual growth rate in provincial GDP based on consumer prices, followed by Gandaki Province at 5.01 per cent.

Similarly, Madhes is projected to have the lowest annual growth rate, at 1.31 per cent, according to the NSO.

“While the national annual GDP growth rate, measured at constant consumers’ prices, is preliminarily estimated at 3.85 per cent, only Bagmati and Gandaki provinces are expected to record growth rates higher than the national average,” read a statement from the Office.

Other provinces are projected to grow at rates below the national average – Sudurpaschim 3.28 per cent; Koshi 3.13 per cent; Lumbini 2.87 per cent; and Karnali 2.94 per cent. This year, Bagmati, Gandaki, Koshi and Sudurpaschim are likely to surpass last year’s growth achievement – 5.29 per cent, 4.92 per cent, 2.72 per cent and 3.21 per cent, respectively.

In the last FY 2024/25, Madhes’ growth rate was 4.43, Lumbini's 4.27 and Karnali's 5.25 per cent. The performance of Madhes and Karnali is estimated to have significantly deteriorated.

 

Agriculture largest contributor

According to economic activities classified by industry, agriculture is expected to remain the largest contributor to provincial economies in all provinces except Bagmati this year. In Bagmati, wholesale and retail trade is projected to contribute the largest share.

“Trade — which holds the second-largest share at the national level — is also expected to rank second in both Koshi and Madhes,” read the report.

Similarly, real estate services are projected to make the second-largest contribution in Bagmati. In Gandaki and Karnali, public administration and defence are expected to rank second in terms of contribution, while in Lumbini and Sudurpashchim, education services are projected to hold the second-largest share.

On the other hand, administrative and support services are expected to contribute the least in Koshi, Gandaki, Lumbini and Sudurpaschim provinces, while mining and quarrying activities are projected to have the lowest contribution in Madhes, Bagmati and Karnali provinces, estimated the NSO.

 

Electricity and gas sector to see highest growth

In terms of the sectoral growth rate, the electricity and gas sector is likely to witness the highest value addition growth rate in Koshi, with 23.76 per cent. This sector is also estimated to be top achiever in Bagmati, Gandaki, Lumbini and Madhes as well, with 22.88 per cent, 23.9 per cent, 9.18 per cent, and 10.91 per cent growth, respectively.

However, in Karnali and Sudurpaschim, financial and insurance services arre estimated to achieve the highest value-added growth, with 8.40 per cent and 7.98 per cent, respectively.

 

Disparities in per capita GDP

As in the growth performances, Madhes is estimated to witness the lowest per capita GDP.

The NSO informed that, according to the preliminary estimates, Madhes’ per capita GDP in US dollars will remain at 934.

On the contrary, Bagmati is expected to record the highest per capita GDP of US$ 2,644.

Likewise, the per capita GDP is estimated to reach US$ 1,651 for Gandaki; US$ 1,410 for Koshi; US$ 1,208 for Lumbini; US$ 1,170 for Sudurpaschim; US$ 1,108 for Karnali; and US$ 934 for Madhes.

At the national level, per capita GDP is estimated at USD 1,513 for the current fiscal year.

Based on this estimate, only Bagmati and Gandaki provinces are expected to record per capita GDP above the national average, while the remaining provinces are projected to remain below it.

Published in The Rising Nepal daily on 21 May 2026.

Debate over provinces reopens with initiation for constitution amendment

 Kathmandu, May 10

At a time when public sentiment is quite against the provinces in the current three-tier federal system in Nepal, concerns are growing about the fate of the subnational governments with the government forming a task force to study and suggest reforms in the constitution.

Not only the ruling Rastriya Swatantra Party (RSP), but also the opposition parties have expressed commitment for constitution amendment in their election manifestos.

Many of those who favour the provincial structure are apprehensive of the RSP's earlier policy to scrap it. However, this has been greatly moderated with the its Senior Leader and now Prime Minister, Balendra Shah, announcing at the very first election mass meeting in Janakpur that the provinces would be strengthened.

Later, the RSP's manifesto promised to continue with the provincial structure. The party said that within three months of assuming office, a ‘discussion paper’ regarding proposals for constitutional amendments would be prepared with the aim of building a national consensus.

According to it, a reformed provincial structure will be an agenda for the amendment along with a fully proportional parliament, a provision ensuring that members of parliament cannot serve as ministers, and non-partisan local government.

Federalism expert and chair of Federalism and Localisation Centre (FLC), Dr. Khim Lal Devkota, said that common people have an impression that provinces have added additional burden to the state with too many ministries and are running sans good governance. They are not innovative and have been the carbon copy of the federal government.

Contrary to it, the provinces blame the federal government for unnecessary interference without lending hand for cooperation and collaboration. Provinces also say the federal government doesn’t support them in the formation of necessary laws and provide staff to run every day operations.

Speaking at an interaction on federalism in constitution amendment organised by FLC in Lalitpur on Sunday, Dr. Devkota said that provinces are not expensive as they only use 4.69 per cent of the total national budget and 61 per cent of their budget is allocated for development work.

RSP Lawmaker Mohan Lal Acharya, who is also the member of the task force, said that many problems were created not because of the intention of the policy provisions but their distorted implementation.

"The issues in federal governance that are not obstructed by the constitutional provisions should be immediately reformed and resolved. Then we can plan for the reforms in the critical areas," he said.

The task force is led by Political Advisor to the Prime Minister Asim Shah and includes Acharya from RSP, Bhishma Nath Adhikari from CPN (UML), Dev Prasad Gurung from Nepali Communist Party, Gyanendra Shahi from Rastriya Prajatantra Party, Manoj Bhatta from Rastriya Janamorcha, law secretary at the Prime Minister's Office Pushkar Sapkota, Secretary of Nepal Law Commission Indira Dahal and Chief of Law and Judgement Implementation Division at the PMO, Liladhar Subedi.

Speaking at the programme, Acharya said that the task force will create a discussion paper after extensive consultations with stakeholders.

"There are less chances of scrapping the provincial structure for the time being but we must scrap the district administration which has created a fourth level in the three-tier federalism," he stated.

According to him, relocating ministries like education, health and agriculture along with their departments to the provinces will help in streamlining the services and increasing efficiency.

 

Weak leaders weakened provinces

Nima Giri, a lawmaker from Lumbini Province, said that appointment of weak leaders to the post of chief minister has contributed to the poor performance of provinces.

"Chief secretary of the province is de facto chief minister," she said.  

President of the Nepal Federation of Indigenous Nationalities Nima Lama Hyolmo showed apprehension towards radical changes in the current status and structure of provinces. However, he advocated for directly elected chief minister to ensure stable leadership in the sub-national government.

Many experts said that provinces should be shaped as development institutions to carry out social and infrastructure development. If given more resources, they can perform better, they said.

NCP leader Gurung said that federalism should be redefined in a way where the central government will do the policy making, provinces development works and local body service delivery – this can be an effective proposition to make the current federal structure effective.

Gurung and several experts indicated that the chief ministers could be elected directly to ensure political stability at the provinces. 

 

'Tourist' staff hampered governance

Dr. Dipendra Rokaya, former planner from Karnali Province, suggested to keep nine ministries at the centre and five in the provinces to reduce the size of the government and administrative costs.

"Entire Humla is a single election constituency which means it gets less budget, less attention and less representation. Our voices are not being heard. This is the challenge," he said while adding that the current formula allocated more budget to the areas on the basis of demographics.

Most of the staff at provinces and local bodies are 'tourists' who don't care about the sustainable development and governance, he said.

Former chief secretary Dr. Som Lal Subedi suggested to take into account the governance capacity of provinces as well as federal government. "One federal infrastructure agency has more budget and power than the provincial chief minister. We only created skeleton of the federal structure but failed to give life to it," he said.

Likewise, former chief minister of Madhes Lal Babu Raut raised concerns over the intentions of the federal leaders, including prime minister, in enabling provinces in the spirit of the constitution.

"No political leader of major political parties contributed to strengthening the provinces but their efforts were to weaken the system. They were not honest in this regard. Province police and civil servant law of Madhes were good examples, we were actually obstructed by the federal government," he said.

According to him, once there was a situation – federal leaders neither wanted to kill the provinces nor activate them.

 

Power sharing, not decentralisation

Meanwhile, many experts also suggested the provinces to execute the existing right list.

Leader of UML Adhikari said that all service delivery units should be sent down to province or local level. "Initially, there were doubts about the capacity of both provinces and local governments but now they have proven their ability," he said.

He suggested to review the practice of provinces in generating resources and exercising their rights and improving service delivery. Continuing with the current structure in the name of federalism will be counterproductive, he said.

Likewise, leader of Nepali Congress parliamentary party in the National Assembly Radheshyam Adhikari said that altering the rights of the subnational government will be more challenging since provincial consent should also be maintained.

"This is not decentralisation, it’s power sharing, many leaders still don't understand it. Nobody cared for power sharing," he said.   

Published in The Rising Nepal daily on 11 May 2026.           

Fiscal Council decides to raise financial equaliation grant

Kathmandu, Apr. 16

The Inter-Governmental Fiscal Council (IFC) has decided to increase the financial equalisation grant in proportion to the growth of the federal budget while improving the fiscal transfer and grant system. 

It also decided to adopt a policy of gradually reducing conditional grants provided by the federal and provincial governments.

"To end the trend of fragmenting budgets into small projects and duplication, budget allocation arrangements shall be made according to the prescribed 'threshold' (minimum limit) for development projects," the meeting of the IFC and thematic committees held at the Ministry of Finance (MoF) on Thursday concluded.

These decisions are made to strengthen fiscal federalism, according to the MoF.

For allocative efficiency and capital expenditure effectiveness, all three levels shall mandatorily implement the concept of a 'project bank' while the National Planning Commission (NPC) shall manage the integration of the project banks of the three levels.

The MoF informed in a statement that the meeting agreed in ending the practice of keeping budgets in 'unallocated' categories, identifying and scraping or settling old 'sick' projects, and ensuring that federal, provincial, and local levels distribute annual programmes and projects in an activity-wise manner during budget formulation.

An agreement also made on reducing the economic liability of the state's recurrent expenditure while all three levels of government expressed their consent to strictly implement austerity policies.

All three levels of government shall emphasise reducing arrears and accelerate settlements by preparing classified details of arrears with a time-bound action plan.

The IFC meeting took notice of the hurdles in acquiring land needed to construct administrative buildings of the provincial governments and mobilising forest-based products and river-based materials, and decided to implement the annual budget and programmes of provincial and local levels and to accelerate the construction of administrative buildings and other government physical structures.

They will request the Office of the Prime Minister and Council of Ministers (OPMCM) for necessary coordination to address existing legal complexities and procedural delays in Land Acquisition.

Similarly, to increase the internal revenue of the federal, provincial, and local levels, request would be made to the OPMCM, the Ministry of Federal Affairs and General Administration, and the Ministry of Forests and Environment to remove legal, policy, and procedural hurdles regarding the sustainable and systematic utilisation and mobilisation of forest-based products and river-based materials, and to facilitate their collection and sale.

The three levels of government agreed to work in accordance with the spirit of federalism, focusing on service delivery and good governance so that citizens can directly experience the impact. They also implement a new formula to increase the share of local levels in royalties from electricity, mountaineering, forests, and mines, based on the recommendations of the National Natural Resources and Fiscal Commission (NNRFC).

Likewise, the meeting decided to coordinate between the three levels of government to control revenue leakage. Each level will prepare and implement a 'Revenue Collection and Leakage Control Improvement Action Plan' within the current fiscal year 2025/26 (or within the next three months) to prioritise internal resource mobilisation.

The Finance Ministry said although the rule-based system of fiscal transfer in Nepal has been institutionalised, the meeting focused on addressing the practical complexities observed in the performance capacity and resource management of the tiered governments.

Speaking at the meeting, Finance Minister Dr. Swarnim Wagle stated that the federal government has taken the legitimate demands regarding fiscal transfer and autonomy put forward by the provincial finance ministers positively.

He expressed concern over the increasing 'grant-oriented' trend where lower levels remain dependent on federal grants due to weak revenue capacity. He committed to making this Council result-oriented by ending financial deviations.

Furthermore, the FM Dr. Wagle assured that the government would take concrete policy and legal reform steps in the coming days to make fiscal transfers more transparent, predictable, and equitable.

The meeting was attended by ministers for Economic Affairs and Planning from all seven provinces, ex-officio and expert members of the Council, the vice-chairman of the NPC, acting chairman of the NNRFC, finance secretary, secretaries from various ministries, deputy governor of Nepal Rastra Bank, and other high-ranking officials.

The provincial finance ministers and members expressed confidence that this meeting of the Council would be instrumental in resolving the policy and practical complexities observed in fiscal transfer and revenue sharing.

Published in The Rising Nepal daily on 17 April 2026.       

Governments stress inter-provincial cooperation in agriculture sector

Kathmandu, Apr. 12

Provincial officials have said that the sub-national governments are struggling to achieve development targets in agriculture amidst lack of budget and human resource crunch, and pragmatic planning.

Speaking at an interaction on 'Interprovincial relation and cooperation in agriculture sector' organised by Federalism and Localisation Centre (FLC) in Lalitpur on Sunday, they stressed on integrated planning, resource mobilisation and market development for agricultural produces.

Keshav Devkota, Joint Secretary of the Ministry of Agriculture and Livestock Development (MoALD), said that roughly 60 per cent of the budget allocated for agriculture is spent on fertilizer.

While development work should be executed in coordination among the three levels of the government, some programmes at province-level are merely copied from federal plans without context-specific customisation.

"The main challenge is one of decreasing resources paired with an increasing number of institutions," said Devkota.

Hari Prasad Pandit, Senior Agriculture-Economic Expert and head of Planning Department in Lumbini Province, shared that despite agriculture being a priority, Lumbini Province has only 38 per cent staff recruitment of the total required staffs.

The provinces receive less than 9 per cent of the total budget, while the federal government spends heavily on fertilisers. Investment in agriculture has declined by 3.46 per cent this year, with uneven provincial allocations.

Pandit said that the absence of a Federal Agriculture Act has stalled provincial and local legislation, caused audit biases and forced Lumbini to seek a grant act instead. The lack of expertise also causes problems. For example, in Lumbini Province, a cold store built for orange failed as the facility was suitable for potatoes only.

The produces kept rotting for three years. Meanwhile, given the huge electricity bills the farmers are not willing to use the cold store which requires 100 per cent electricity subsidy, said Pandit.  

Minister for Agriculture and Livestock Development Minister of Bagmati Province Madhusudan Poudel appreciated the achievements of provinces in agriculture sector.

“Agriculture is critical for local employment, yet Nepal faces the challenge of cheap cross-border products undercutting high-cost domestic agricultural production," he said.

While Bagmati Province has banned plastic flowers and runs a cold store, the federal government continues to buy milk from India despite an existing local powder plant. "To address these issues, the federal government should subsidise the electricity bills of cold store and prioritise preserving and utilizing national production," said Minister Poudel.

Likewise, Manjari Shakya Bajracharya, Deputy Mayor of Lalitpur Metropolitan City, said that the governments must take integrated data seriously, reduce legal hurdles, protect agricultural land, stop using fertilisers that developed countries discard.

Arjun Dev Jnagwali, Agriculture Extension Officer, Ministry of Land Management, Agriculture and Cooperative Development of Gandaki Province, said that the technical staffs are acting as administrative.

Dr. Khim Lal Devkota, Chair of FLC, presented a paper highlighting the significance of interprovincial learning and cooperation in agriculture sector.

Published in The Rising Nepal daily on 13 April 2026.       

Madhes University begins preparations for federalism course

Kathmandu, Jan. 13

The Madhes University (MU) is set to launch a course on 'Federal Governance System'.

In an interaction on 'Developing curriculum on federal governance system' organised by the Federalism and Localization Centre (FLC) and Federalism Study Centre (FSC) of the Madhes University (MU) in Lalitpur on Tuesday, the university stressed on the need for the courses on federalism in higher education.

Discussion on the course on federalism is initiated after a decade since the country adopted the federal structure and amidst the ongoing debate whether the country should adopt two-tier structure by shedding off the provinces from the system.

Two political parties voiced their policies against the federal structure, especially the provinces in the pretext of extra financial burden.

The MU was established in September 2022 after the formulation of Madhes University Act in the same year. It is offering courses on BALLB, BPAM, BEM and MPA. The FSC was established in September 2024.

Experts suggested that the curriculum should include the basic elements of federal system, its merits and demerits in the Nepali context, divisions of power, relations among different levels of the government, administrative and fiscal federalism, and practices in other countries adopting the similar system.

Senior researcher at the Policy Research Institute Dr. Kalpana Khanal suggested that the curriculum should include provisions for real-time learning through the visit of the political and economic institutions at the different levels of the government and interactions with the people's representatives and bureaucrats.

She said that although people have an impression that the provinces have caused extra financial burden, it actually has reduced the cost following the scrapping of the district and regional-level administrative structures.

Likewise, Mayor of Hetaunda Sub-Metropolitan City Mina Kumari Lama said that the planned course should be able to create human resources that are capable to fulfill the need of the subnational governments in different areas.

Stating that the local bodies need more competent leaders and bureaucrats, she appreciated the attention of the MU to the critical issue like the federal governance system.

Prem Narayan Aryal, former VC of the Pokhara University, suggested to begin with a chapter of a portion of content at the Bachelor's level and a subject at the Master's degree.

Dr. Tula Narayan Shah, Executive Director of Nepal Madhes Foundation, suggested to bridge the gap among the governments and pay attention to the development challenges.

Skills like negotiations, conflict management, information system, leadership, sustainable development and climate change, inter-governmental relations and cooperation are recommended in the course of study.

The course should have a clear focus on one of the various aspects of federalism – such as fiscal, administrative, resource management and political. Proper mix of practical and philosophical elements should be included in the curricula, academicians and experts suggested.

Chairperson of the FLC Dr. Khim Lal Devkota, who also chairs the FSC at the MU, said that the university aims at offering the course not only to meet the academic need but also market demand.

"Alongside the full-fledged degree courses on federalism, we also aim to develop short-term courses to facilitate those who have interest and need to have the knowledge on the subject," he said.

Vice-Chancellor of the MU, Prof. Dr. Deepak Bahadur Shakya, said that the university is planning to introduce subjects in new areas that are the need of the society.

Currently, the Tribhuvan University is offering a subject on federalism in Bachelor's degree while the Kathmandu University has specialisation option in federalism and local governance under the Masters in Public Policy and Management course. Likewise, the Staff College also runs training under its Centre for Federalism. 

Published in The Rising Nepal daily on 14 January 2026. 

Provinces still struggle to stand on their own fiscal feet

 Federalism in form, dependency in practice

From timid tax policies to revolving-door chief ministers, Nepal’s provinces have failed to translate autonomy into economic strength

 

Kathmandu, Jan. 3

In the past eight years since their creation, the provinces have failed to demonstrate their interest or innovation in finding new sources of internal revenue and expand their tax base. Reliance on the traditional sources and weak revenue administration have miserably restrained the provinces from strengthening their economy.

Currently, provinces are banking on transportation, agriculture, natural resources like construction materials and house-rent for their revenue while experts say that agriculture is not and should not be a major source of revenue. As it is in the phase of development and directly connected with the livelihood of many, it should rather be facilitated, except the commercial farming and agro-processing industries.

However, the provincial governments couldn't effectively tax the construction material industries such as collecting and distributing sand, gravel and stones. "All the provinces are following a similar traditional trend. All of them lack innovative approach and long-term strategies for revenue growth," said Keshav Raj Dhakal, Spokesperson of the National Natural Resources and Fiscal Commission (NNRFC).

A trend analysis of the Provincial Revenue (2018/19-2025/26) by a team led by Dr. Khim Lal Devkota – a Constitutional Assembly Member and expert in federalism – for the Federalism and Localisation Centre (FLC), found that agriculture's contribution is the lowest in the local tax revenue of the provinces.

"Excluding revenue sharing and royalties, motor vehicle tax contributes the largest share to the country’s local tax revenue, with 32.83 per cent. This is followed by land and property registration fees, which account for 31.21 per cent. The contribution of business registration fees stands at 18 per cent," concluded the report.

 

Spending priority, earnings unheeded      

While the governments at all levels required to follow a mandatory rolling three-year budget plan – the Medium-Term Expenditure Framework (MTEF) which requires the resource forecasts and performance targets along with detailed expenditure strategies, the sub-national governments are more focused on expenditure. As the plans and budgets have been the tools to accommodate the political and development commitments of the political leaders, projects are included in the budget at a whim of a leader or the ruling political party.

The NPC and the NNRFC have observed that revenue mobilisation plan has rarely been the priority of the provincial governments, even their budgets are largely dependent on federal grants and revenue sharing.

Former Member of the National Planing Commission (NPC) Min Bahadur Shahi said that provincial governments failed to exercise the rights stipulated for them. "At the least, they could effectively collect revenue from public commons like forests, and river and mine-based construction materials," he said.

According to Dhakal, most of the interactions with the federal government or planning agencies are centred on grant and revenue distribution. Tax expansion plan, revenue growth and reforms generally don't get priority in such meetings.

According to the Schedule 6 of the Constitution of Nepal 2015, land and property registration fees, motor vehicle tax, entertainment tax, advertisement tax, tourism tax, tax on agricultural income, service charges and fees, penalties and fines fall under the rights of the provinces.

 

Need for risk-takers

The autonomy of provinces has remained limited to the Constitution and policy documents as they look up to the federal government for financial support and development execution. They seem to be shying away from exercising their autonomy in critical areas such as tax. This is because no leaders want to take a risk of displeasing their voters. The house-rent tax is a case in this regard.

For example, Karnali projects to raise just Rs. 1.37 billion in revenue in the current Fiscal Year 2025/26 from internal sources against its annual budget of Rs. 32.99 billion. The province raised Rs. 100 million in the first quarter of this fiscal.

Likewise, Sudurpaschim estimates to manage Rs. 1.65 billion from internal sources for its budget of Rs. 33.47 billion. Koshi and Gandaki aim to raise Rs. 5.5 billion and Rs. 5.46 billion in revenue, Lumbini Rs. 7.78 billion, Madhes Rs. 9.5 billion and Bagmati Rs. 28.8 billion. Average share of internal revenue to the provincial budget ranges from about 5 per cent to 20 per cent with Bagmati being an exception.

According to FLC's analysis, internal revenue constitutes about 20 per cent share in the total income of the provinces. Including the revenue sharing, its share rises to 54.58, and share of federal grants is 45.42 per cent.

There are not only failures. Bagmati has collected 31.44 per cent of its annual revenue in the first five months of the current FY 2025/26 while the federal government's achievement stands at about 27 per cent. Bagmati collected Rs. 1.50 billion in internal revenue against the annual target of Rs. 4.77 billion. But overall receipt of the province in the five months is 24 per cent.

 

Discouraging scorecard

All seven provinces in Nepal have performed poorly in the annual evaluation by the NNFRC in 2023/24, with only Koshi scoring above the 40 – which is pass mark. The remaining six failed, with Madhes Province recording the lowest score of 20.5, Karnali 25.9, Sudurpaschim 26.1, Lumbini 34.4, Bagmati 36.1 and Gandaki 38.5.

The assessment, based on 19 fiscal, budgetary and governance indicators, found the provincial average score to be 32.25. In contrast, local governments performed better, with most scoring above 50.

According to Dr. Devkota, delay in the formulation of basic legal instruments such as Civil Service Act in provinces has also serious repercussions on their performances. He suggested the CMs to remain united to exert legitimate pressure to the federal government and their respective party committees. To the least, they should learn from the local bodies, he said.

The federal government exhibited negligence in formulating the umbrella frameworks to facilitate the sub-national governments. The latter designed the laws related to civil servants and police personnel but in absence of the umbrella legal instruments from the federal government, they remained idle. The intergovernmental council has also turned into a mechanism that only conducts meetings but achieves no progress.

While speaking at the establishment day of the PAs in 2024, former CM of Karnali, Raj Kumar Sharma, aptly defined the situation of freedom to the provinces, “How can you swim in deep water when you are thrown into it with your hands and legs tied. I don’t know if saying this is appropriate, but the situation has been the same for us."

However, although the provincial leaders agree that their failure is partially caused by the federal government's failure in building the required legal and policy framework in time, they never get united for the same cause.

 

41 governments in eight years

In a sheer display of political instability in the federal republic, the seven provinces got 41 chief ministers in the past eight years.

Lal Babu Raut of Madhes Province has remained so far the only Chief Minister to complete his full term at office. But the same province turned into political battleground in its second Provincial Assembly (PA) with five CMs from five different parties in just two-and-a-half years. Jitendra Prasad Sonal of Loktantrik Samajwadi Party and Saroj Yadav of CPN-UML served for 24 days each as Madhes CM. Meanwhile, Province Chief Sumitra Subedi Bhandari lost her post after appointing Saroj Yadav the CM and administering the oath of office at a hotel in Bardibas.

The provinces were created on September 20, 2015, while provincial assemblies were formed after the elections on November 26 and December 7, 2017. The first provincial government was formed in Karnali on February 15, 2018.

In general overview, Karnali is comparatively more stable than the other provinces with four CMs so far with two each – Mahendra Bahadur Shahi and Jeevan Bahadur Shahi, and Raj Kumar Sharma and Yam Lal Kandel – serving during the first and second PAs.

While Gandaki, Lumbini and Bagmati witnessed six CMs each in the past eight years, Koshi went through the worst experience in political stability with eight CMs – five in the last two-and-a-half years. Currently, Hikmat Kumar Karki is serving as the CM for the third time during this PA along.

Likewise, Sudurpaschim Province got five CMs.

 

Lack of political autonomy

It is no secret that the provincial governments and political leaders make their moves at the signal of federal government and their party central committees. "Provincial committees of the political parties are not autonomous while senior and competent leaders do not want to go down to the provinces. As a result, governments there have become an appendage of the central government," said Dr. Devkota.

To their worst, this is happening at a mutual consent of the political party, federal government and the provincial governments.

According to Dr. Devkota, Madhes led by Lal Babu Raut, Gandaki led by Prithvi Subba Gurung and Lumbini led by Shankar Pokhrel had a courage to resist the pressure from the federal government.

Within a year, Gurung called a meeting of the CMs in Pokhara and exhibited a unity among the provincial governments. A 29-point federal legal roadmap was also developed during that period. The centre had a majority government led by powerful Nepal Communist Party (NCP) that, in the beginning, assured a political stability which also sent a similar message to the provinces, said Dr. Devkota. He added that while the first inter-state council was called after 40 years in India, it was convened in a year after the formation of the first provincial governments.

While Madhes was vocal against the federal government for various other reasons and fought for its cause, Gurung and Pokhrel fought against their own party leadership to make their way through to institutionalise federalism.

But during the second Provincial Assembly, senior leaders joined the batch of leaders at the federal level which turned the provincial politics more immature. They are more centre-oriented and pay less attention to the public issues and political stability. As the governments formed and fell every now and then, provinces miserably failed in effective development planning, resource mobilisaion and revenue collection. This further detached them from the masses.

An official at the NPC said that the situation has deteriorated to such an extent that chief ministers are meeting even the section officers at the NPC and Ministry of Finance to get their projects included in the federal budget or get financial assurance for provincial projects.

 

Dancing to the tunes of centre

Later, the number of ministries at the provinces was increased multiple times to adjust the leaders from the ruling coalition which mostly happened at the direction of the federal government and central committees of the parties participating in the coalition.

"A new culture has been developed – the provinces seek centre's opinion and the latter directs the former," said Dr. Devkota.

This political culture is rooted so deep that the provinces couldn't function independently even when the country has a civilian government and large political parties are hesitant to exercise their political muscle.

Shahi, who is also the founder chairperson of Karnali Integrated Rural Development and Research Centre and General Secretary of the Former Planners Forum Nepal, said that the senior leaders discourage the youth leaders and federal government discourages the provinces on the pretext of lacking 'capacity'.

"We have developed a system that bars the sub-national governments from being progressive. Entire system is process-oriented and no one cares for the outcome and its impact on people," he said.

Shahi maintained that Kathmandu takes decision about the ministers and alliance in the provinces. The provincial committees of the parties neither have power nor desire to intervene in such affairs.

According to Dr. Devkota, the power of the government was devolved and restructured in the federal model but the political parties didn't restructure them according to the newly evolved system. 

Published in The Rising Nepal daily on 4 January 2026. 

Two-thirds of industrial bank loans in Madhes mobilised in Parsa district

Kathmandu, Nov. 13

Almost two-thirds of the total industrial loan channelled by the banks and financial institutions has been mobilised to Parsa district alone.

According to a report of the annual economic activities of the province of Fiscal Year 2024/24 published by the Nepal Rastra Bank (NRB), of the Rs. 128.09 billion loan mobilised by the banks and financial institutions to the industries of the province, Rs. 81.7 billion (63.79 per cent) is invested in Parsa.

Dhanusha comes second with 10.31 per cent (Rs. 13.2 billion) share in the industrial loan mobilised in the province, followed by Bara with 5.83 per cent (Rs. 7.46 billion), Sarlahi with 5.26 per cent (Rs. 6.73 billion), and Siraha with 4.86 per cent (Rs. 6.22 billion).

Saptari has the smallest share of industrial loans with 2.12 per cent (Rs. 2.71 billion).

The total loans disbursed by banks and financial institutions to the industrial sector increased by 5.11 per cent in the FY 2024/25, reaching Rs. 128.09 billion. This loan amount was Rs. 121.87 billion in FY 2023/24.

Sector-wise, 51.76 per cent bank loan was mobilised to non-food product manufacturing industries, and 37.39 per cent in agriculture-forestry and beverage production industries. Construction industry received 5.26 per cent, and metal production, machinery, electronics and metal goods manufacturing 4.13 per cent.

Meanwhile, in the FY 2023/24, the area occupied by vegetables and horticulture in the province increased by 10.27 per cent. Conversely, the area occupied by food and other crops decreased by 1.49 per cent, and the area occupied by fruits and spice crops decreased by 25.20 per cent and 7.94 per cent, respectively.

Similarly, production of food and other crops increased by 14.01 per cent in the fiscal year 2081/082. While the production of vegetables and horticulture increased by 9.79 per cent, the production of fruits decreased by 9.07 per cent, and spice production decreased by 10.53 per cent.

In the last FY, the average production capacity utilisation of major industries included in the sample selection for the study was 46.47 per cent.

The report has noted that, as Madhes is located in the border region of India, it has potential for expanding trade and industry in the large Indian market.

Similarly, the cost of transporting industrial raw materials from India is likely to be low, making it possible to produce and export goods at a lower cost.

“As the province has the largest population density and the second-largest population in the country, ensuring easy labour supply, there is potential to establish industries in Madhes Province, increase production, enhance the competitiveness of manufactured goods, and increase the contribution of the industrial sector to the total Gross Domestic Product of the province,” read the report.

According to it, there is potential to develop areas with favourable geographical and industrial development prospects, such as market access and labour supply, into industrial zones,” read the report.

Likewise, abundant production of agricultural goods offers a good prospect for establishing agriculture-based industries (such as sugar, food processing, and oil industries).

According to the National Statistics Office, GDP of Madhes last year was Rs. 804 billion against the national GDP of Rs. 6107 billion. Madhes’ GDP is estimated to grow by 3.88 per cent in FY 2024/25.

 Published in The Rising Nepal daily on 14 November 2025.          

Govt announces sweeping austerity measures

Kathmandu, Sept. 24

The government has announced a series of budget control measures aimed at improving fiscal responsibility and ensuring the efficient mobilisation of public funds.

The directives issued by the Ministry of Finance (MoF) on Tuesday, as per the Cabinet decision on Sunday, focus on curbing unnecessary spending and prioritising strategic projects.

According to the new guidelines, budgetary support will be assured to the projects that have already received source approval. However, no new, small-scale, or redundant projects will receive funding unless they align with the national priority objectives.

As per Section 21 of the Economic Procedures and Financial Accountability Act 2018, all new or unprepared projects within the capital expenditure framework will be locked to prevent unnecessary duplication or misallocation of funds. Similarly, any budget that remains unused due to a lack of identified projects, particularly under general categories such as ‘miscellaneous’ or ‘other’, will also be locked.

The government has also taken steps to ensure that small, fragmented projects that could be better handled by provincial and local governments will not be funded from federal resources. Likewise, any liabilities incurred in the previous fiscal year but left unpaid will be given priority, with budget locks lifted to settle outstanding payments, if needed.

In a move to safeguard national priority projects, the MoF has stated that funds can be transferred from locked budget sub-headings to support projects with approved sources of funding, particularly those that have created or are expected to create liabilities within the current fiscal year.

This flexibility also covers the national priority projects, even if their allocation is currently insufficient.

Likewise, when rebuilding government structures, a new emphasis will be placed on creating service-user-friendly, open, and well-planned spaces that accommodate the nature of work and staff requirements.

 

Consumer committees scrapped

In a significant move, the MoF has prohibited consumer committees from implementing projects exceeding Rs. 1 million.

Similarly, various austerity measures were introduced to control unnecessary expenditure and improve fiscal discipline across all levels of government. They include allowances, consultancy services, and organisational structures.

One of the most significant changes involves a crackdown on allowances. From now on, regular meeting allowances will not be provided to officials and employees of public bodies for their routine duties. However, allowances can still be given for meetings held outside of office hours for legally established committees.

Furthermore, officials who reside in private residences, either owned by themselves or their families, will no longer be eligible to receive accommodation allowances.

 

Control on consulting services

The government has also imposed stricter controls on the use of consulting services. Funds allocated for work that can be performed by existing staff will not be used to hire external consultants. Similarly, consulting services can be procured for capital research and consulting services, not for drafting bills, rules, regulations, guidelines, and similar tasks.

The new measures mandate that all government offices should manage service expenses – particularly for water, electricity, and communication fees – more economically. Employees are instructed to ensure that electricity-consuming devices such as lights, air conditioners, and fans are turned off when not in use.

 

Install offices in modest areas

Government offices are restricted to renting houses with more facilities than necessary and refrain from renting in commercial areas or along main roads. This policy applies to both domestic offices and diplomatic missions abroad, where lease renewals should prioritise modest housing options.

The government has also prioritised the use of old government vehicles, furniture, and electronic equipment. Federal, provincial, and local governments are required to use existing resources, such as old vehicles, mobile phones, computers, and motorcycles.

Similarly, government offices affected by the Gen Z movement are to receive necessary office equipment and furniture through transfers from nearby offices. The government has also initiated plans to insuring physical government structures to ensure their long-term sustainability.

 

No new hiring

In an effort to streamline government operations, the government said that no new positions will be created, except in essential technical roles. To avoid long-term liabilities, expert services and consultancies should replace the creation of permanent positions. Ministries such as Finance, Home Affairs, and Foreign Affairs, which have recently undergone organisational surveys, will also undergo brief reviews to eliminate unnecessary structures and positions.

Likewise, the government also plans to abolish redundant commissions, such as the Land Problem Settlement Commission, and make structural changes to enhance national security and improve revenue collection.

The restructuring includes integrating certain departments, such as the National Investigation Department and the Revenue Investigation Department, under the Ministry of Home Affairs and the MoF, respectively.

Further austerity measures have been implemented to reduce current expenditure with a provision to restrict the non-essential training, workshops, and seminars, and conduct trainings online or at the government facilities. International travel will be limited to essential government representatives, with delegations to international conferences set at 10 members for heads of state and three members for other delegations.

The government has also said that public sector investments will now be restricted to profitable or foreign-aid-funded projects. No new investments will be made in financially weak public corporations, and government-invested corporations will be prohibited from issuing rights shares or further public offerings during this period.

As per the new guidelines, no new vehicles will be purchased for official use unless existing vehicles are insufficient for critical tasks, such as conducting elections or ensuring security. 

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Provinces must follow austerity rules: FM Khanal

 Biratnagar, Sept. 24

Finance Minister Rameshore Prasad Khanal has said that the austerity directives issued by the Ministry of Finance (MoF) on Tuesday must also be implemented by provincial and local governments.

Amidst growing dissatisfaction among provincial ministers who have raised concerns that, as autonomous and independent bodies, provincial governments are not obligated to implement decisions made by the federal Cabinet without passing their own laws, Minister Khanal stressed that the decisions of the Cabinet must be followed by all.

While visiting the Internal Revenue Office in Biratnagar, which was destroyed in a fire, Minister Khanal briefly responded to questions from the media, reiterating the need for everyone to cooperate in adhering to austerity measures.

The federal government’s decisions have raised uncertainty about the facilities for those appointed by provincial assemblies through provincial laws.

In response to the federal government's decision, Rewati Raman Bhandari, Minister for Internal Affairs and Law of Koshi province, said that from a constitutional and legal standpoint, provincial governments are not bound to follow the federal government’s decision. He argued that the provinces have the autonomy to make their own decisions, and if changes are needed in provincial laws, they must be amended accordingly.

However, FM Khanal clarified that this decision was made for austerity purposes and must be implemented across all levels of government, irrespective of provincial laws. "This decision has been taken for austerity, and being a federal Cabinet decision, it applies to all bodies. No expenditure should be made from the federal government’s grants on these matters," he said.

Minister Khanal further elaborated that even if appointments are made according to provincial laws, any expenses for these positions, which are funded by federal grants, should not be used for unnecessary appointments.

Minister Khanal indicated that while the federal government’s decision does not nullify provincial laws, it could impose restrictions on how federal grants are used.

 Published in The Rising Nepal daily on 25 September 2025.