July 6: Municipality Association of Nepal (MuAN) and the National Association of Rural Municipalities in Nepal (NARMIN) submitted a memorandum to Finance Minister Dr Prakash Sharan Mahat urging the government to revoke its decision to deduct the equalization grants announced for the local level governments.    

President of the MuAN Bhim Prasad Dhungana and President of the NARMIN Lakshmidevi Pandey submitted the memorandum to Finance Minister Dr Mahat at Singha Durbar on Wednesday, according to the RSS.    

In the memo, they have demanded that the last installment of the fiscal equalization grant to be sent to the provincial and local levels for the fiscal year 2022/23 should be released without any delay, the state-owned news agency reported. The first 50 percent of the amount has already been disbursed.    

The budget of the local governments, which are already struggling due to minimal internal revenue, will be seriously affected by the reduction in the equalization grant, reads the memo. Furthermore, they argued that the decision to deduct the equalization grant is against the spirit of fiscal federalism and the constitution.    

Since the deadline for spending in the current fiscal year is July 8, the funds should be released immediately, adds the memo.

Around two months ago, the government had decided to cut the fiscal equalization grants due to pressure on its finances. A cabinet meeting on April 25 decided to downsize the grant by 50 percent from Rs 46 billion to Rs 23 billion as it struggled to strike a balance between its increasing current expenses and dwindling revenue collection.

With the current fiscal year drawing to a close, the government has fallen short of its revenue collection target by Rs 500 billion.

The government had set a target of collecting revenue of Rs 1403.14 billion in the current fiscal year. However, the government has been able to collect only Rs 899 billion as of July 3. The current fiscal year ends on July 16.