Capable local governments must for federalism to succeed: Experts

KATHMANDU: Stakeholders have underlined the need to make subnational governments financially capable of making federalism successful in Nepal.

Speaking at a program entitled “Federalism in Nepal: A Financial Perspective” organized by the Society of Economic Journalists, Nepal (SEJON) on Friday, they said the financial capacity of provincial and local governments should be strengthened to strengthen federalism.

Economist Achyut Wagle said federalism must first be embraced in the mindset of political parties and their leaders. “There is a tendency to give authority to subnational governments without increasing their capacity and stripping the authority citing weak performance,” he said, adding that deputy mayors have been given the responsibility for budget preparation and judicial committees without adequate capacity. “Forty-nine local governments have failed to prepare their budgets for fiscal year 2024/25. The budget prepared by some local units lack proper structure and do not adhere to basic budgeting principles,” Wagle said.

Also speaking on the occasion, Yatindra KC of Samriddhi Foundation, said the grants being provided to lower governments have not been effective. “There is a need to bring improvement in the distribution of grants by identifying weaknesses,” he added.

Likewise, Balananda Poudel, chairperson of the National Natural Resources and Fiscal Commission, Poudel advocated for increasing equalization grants and reducing conditional grants to lower-level governments, stating that this would allow local governments to plan better within their jurisdictions. He also criticized the federal government for failing to make accurate revenue forecasts which has led to budget discrepancies.