The combined budget of the seven provinces for 2024/25 totals Rs 276 billion, a decrease from the Rs 280 billion allocated in the current fiscal year. This reduction has been attributed to cuts in grants from the federal government.

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In the budget for fiscal year 2024/25, Minister for Finance Barsha Man Pun has reduced grants to provincial governments by 8% compared to the current fiscal year. The federal government allocated Rs 105 billion in grants to seven provinces in the current fiscal year which has been reduced to Rs 95.56 billion for 2024/25. 

The reduction in federal grants, coupled with shrinking internal revenue sources, has compelled most provincial governments to propose smaller budgets for the next fiscal year. The combined budget of the seven provinces for the upcoming fiscal year is Rs 276.47 billion, down from Rs 280.76 billion in the current fiscal year. While five provinces have cut their budgets for the next fiscal year, Bagmati and Sudurpaschim provinces have increased theirs compared to the current fiscal year. Due to the economic slowdown, some provinces have adjusted their revenue targets, while others have trimmed their overall budget sizes. The budget for the next fiscal year comes at a critical time for the provinces, many of which have been marred by political instability. Over the one and half years, the provinces have seen a total of 21 chief ministers and 23 floor tests, leading people to question the rationale behind the provincial system.

Despite the budget reductions, provincial governments have focused on enhancing production, productivity and employment opportunities through infrastructure development, agriculture and tourism. A significant portion of their budgets, about one-third, is allocated to physical infrastructure development. Administrative expenses at provincial and local levels are also prioritised. Following these allocations, the health sector receives substantial portion of provincial budgets. Agriculture, local production, tourism and information technology are emphasised in provincial budgets.

The provincial governments have not allocated funds directly to the controversial Constituency Infrastructure Development Program, which has been halted by the Supreme Court. Instead, they have distributed the budget for this program to parliamentarians through indirect means. The provincial governments of Lumbini, Bagmati, Gandaki, and Sudurpaschim have asked each member of the provincial assembly for a list of plans and included them in the budget. The other provinces have also made similar plans for the electoral constituencies in an indirect manner.

Still Reliant on Federal Government 

Provinces are reliant on the federal government for revenue, given their limited income sources. Inter-governmental grants and revenue sharing from the federal government play a crucial role in provincial budgets. The budget for fiscal year 2024/25 reflects this trend as a significant portion of their revenue relies on the federal government grants. Only a minor fraction of revenue of all seven provinces will come from internal sources. Given their dependence on federal funding, some provinces are undertaking initiatives to enhance internal resources through additional studies, while others are prioritising implementing suggestions made by previous studies. Furthermore, some provinces aim to broaden their tax base to bolster revenue streams.

With only Rs 4.98 billion revenue coming from its own sources, Koshi Province has expanded the scope of the environment tax in 2024/25. The easternmost province plans to impose an environment and industrial management tax on industries that process river products, including the concrete block industry. Previously, this tax was only levied on cement and brick industries within the province.

While the Madhesh government has set a target of raising Rs 9.7 billion from internal sources, it has not introduced any new tax policy in the latest budget. The budget speech highlighted plans to decrease tax and non-tax revenue losses by enhancing its Revenue Administration Division.

The Bagmati province government aims to raise Rs 27.58 billion from internal sources. The province plans to conduct further studies to determine the scope and basis for taxing agricultural income. Additionally, the budget includes the formation of a task force of experts to study and propose strategies for resource mobilisation within the province. Likewise, Gandaki is setting up a Provincial Revenue Management Office to better organise the province's revenue mobilisation. The province has planned to raise Rs 5.17 billion in revenue from internal sources. Lumbini has stated that it will now levy taxes on cash grants given to various individuals, groups and organisations. The province plans to raise Rs 7.51 billion in revenue from internal sources. The provincial government has also said that it would activate the Revenue Consultation Committee and develop a realistic assessment system to ensure accurate revenue from real estate transactions. Karnali Province plans to form a study and suggestion task force to assess and explore the potential for revenue mobilisation within the province. The provincial government has targeted to raise Rs 830 million in revenue from internal sources. The Sudurpaschim government has targeted to raise Rs 1.6 billion from its internal sources in 2024/25. 

Koshi Allocates Highest Budget for Infra Development

The Koshi government has announced a budget of Rs 35.27 billion for the next fiscal year, which is Rs 1.5 billion less than the current fiscal year's budget of Rs 36.74 billion. Presenting the budget, Minister for Economic Affairs and Planning, Ram Bahadur Magar, stated that Rs 14.47 billion (41%) has been allocated for recurrent expenditure, Rs 16.20 billion (45%) for capital expenditure and Rs 4.60 billion (13.69%) for financial management.

The Koshi provincial government has allocated the highest resources to infrastructure development (Rs 10.41 billion). Other top priority sectors include drinking water and energy (Rs 4.76 billion), health (Rs 3.58 billion), forestry and environment (Rs 2.82 billion) and agriculture (Rs 2.67 billion).

The budget focuses on boosting agricultural productivity, developing physical infrastructure, enhancing education and healthcare and alleviating poverty. It includes provisions for interest subsidy on agricultural loans to promote farm commercialisation and outlines plans to phase out agricultural subsidies from the next fiscal year.

Madhesh Prioritises Agriculture

The Madhesh government has unveiled a budget of Rs 43.89 billion for the upcoming fiscal year 2024/25, slightly lower than the current fiscal year's budget of Rs 44.11 billion. Finance Minister Bharat Prasad Sah has allocated Rs 16 billion (36.45%) for recurrent expenditure and Rs 27.89 billion (63.55%) for capital expenditure. The 2024/25 budget places a significant emphasis on agriculture which holds the highest potential in the province. Minister Sah has stated that enhancing soil health will be a key priority. Agricultural electrification has been designated as a provincial pride project. The budget includes measures to provide identity cards and pensions to farmers.

Other notable initiatives in the budget include the "Save Chure, Save Madhesh" program and the establishment of a model school in each provincial constituency. Additionally, funds have been allocated to set up an international cricket training centre in Birgunj and to implement the Chief Minister's Housing Security Plan for Dalits.

Despite the budget reductions, provincial governments have focused on enhancing production, productivity and employment opportunities through infrastructure development, agriculture and tourism.

Bagmati Expands Budget Size

Bagmati Province has announced the largest budget among the seven provinces, totaling Rs 64.54 billion for FY 2024/25, which is approximately Rs 2 billion more than the current fiscal year. The provincial budget, presented by Minister for Economic Affairs and Planning Jagannath Thapaliya, has allocated Rs 26.10 billion for recurrent expenditure, Rs 36.93 billion for capital expenditure, and Rs 1.5 billion for financial management. The provincial government has set aside Rs 4.8 billion for health sector infrastructure programs, Rs 3.91 billion for education and social development, Rs 3.31 billion for forestry and environment and Rs 930 million for employment and transportation. 

The province government has prioritised infrastructure development by allocating the highest resources, Rs 22.64 billion, to the Ministry of Physical Infrastructure Development. Within this allocation, the provincial road master plan will receive Rs 7.78 billion. This comprehensive plan includes the designation of 20 roads as provincial highways and 230 as provincial roads, with Rs 2.28 billion specifically earmarked for the development of roads, bridges, and suspension bridges.

‘Invest Gandaki’ for Agriculture and Tourism 

Gandaki has brought a budget of Rs 32.97 billion for the upcoming fiscal year, emphasising infrastructure, tourism, agriculture and drinking water sectors. The 2024/25 budget, presented by Minister for Economic Affairs Dr Tak Raj Gurung has earmarked Rs 13.16 billion (39.91%) for recurrent expenditure and Rs 19.51 billion (59.19%) for capital expenditure. 

A key focus of the budget is achieving self-reliance in agriculture. The government has introduced the ‘Invest Gandaki Program’ targeting the agriculture and tourism sectors to enhance self-sufficiency in food production. The budget also includes provisions for implementing laws on marijuana cultivation. The government aims to achieve self-sufficiency in food, vegetables and fruits by developing a province-level land use plan. An allocation of Rs 915 million has been made for the Ministry of Tourism, Industry, Forest and Environment. Additionally, Rs 5.47 billion has been allocated for the social and health sectors. Significant investments have been made in infrastructure, with Rs 12.70 billion allocated for physical infrastructure and transport management, and Rs 4.02 billion designated for energy, drinking water and irrigation projects in the next fiscal year.

Lumbini Increases Capital Expenditure

Lumbini has proposed to spend Rs 38.97 billion in the upcoming fiscal year, which is Rs 1.51 billion less than the current fiscal year's budget of Rs 40.48 billion. Minister for Economic Affairs and Planning, Chet Narayan Acharya, explained that the reduction in next year's budget was necessary due to constraints in internal resources and a decrease in the grant received from the federal government. The budget has allocated Rs 11.24 billion for recurrent expenditure, Rs 24.58 billion for capital expenditure and Rs 3.14 billion for fiscal transfers to local levels. The provincial government has focused on increasing capital expenditure while reducing recurrent expenditure by Rs 2.29 billion and boosting capital expenditure by Rs 1.32 billion.

The government has introduced initiatives under 16 different slogans, ranging from 'Prosperous Lumbini, Self-Reliant Province' to 'Back to Culture, Back to Nature.' These include programs such as 'Provincial Government with Wildlife Victims,' 'My Health Improvement, My Responsibility', 'Farmers' Hands, Province's Support' and 'Healthy Life Starts with Soil Improvement.'

Provinces are reliant on the federal government for revenue, given their limited income sources. Inter-governmental grants and revenue sharing from the federal government play a crucial role in provincial budgets.

Additionally, the provincial government plans to implement at least one multi-year project in each of the province's 52 electoral constituencies, allocating a total of Rs 3 billion for this purpose. Specifically, Rs 1.8 billion will be used for constructing the building of Lumbini Provincial Hospital. The budget has also earmarked Rs 1.10 billion for community and campus infrastructure development, Rs 1.30 billion for drinking water management and Rs 610 million for embankment works to mitigate water-induced disasters. Furthermore, Rs 135 million has been allocated for the energy and electricity sector, and Rs 163 million for road widening.

Karnali Aims to Create 16,000 Jobs 

Karnali Province has proposed a budget of Rs 31.41 billion for FY 2024/25, with a strong focus on economic development and social welfare. Minister for Economic Affairs and Planning, Mahendra KC, announced allocations of Rs 7.57 billion for recurrent expenditure, Rs 18.75 billion for capital expenditure to boost infrastructure development, and Rs 4.83 billion for fiscal transfers to local levels. Minister KC has said that the budget aims to realise the slogan of 'Prosperous Karnali, Happy Residents of Karnali'. The government has introduced the Chief Minister Employment Program with a budget allocation of Rs 1.16 billion, targeting the creation of 16,000 jobs. The provincial government has allocated Rs 10.46 billion for the Ministry of Physical Infrastructure and Urban Development, Rs 5.72 billion for the Ministry of Social Development, and Rs 1.86 billion for the Ministry of Land Management, Agriculture and Cooperatives.

Sudurpashchim Sets Aside Rs 13.35 for Infra 

Sudurpaschim Province has brought a budget of Rs 31.62 billion for FY 2024/25, which represents an increase of approximately Rs 1.5 billion compared to the current fiscal year. Minister of Economic Affairs Surendra Bahadur Pal has allocated 35% of the budget (Rs 11.07 billion) per recurrent expenditure and 55.42% (Rs 17.53 billion) for capital expenditure. Additionally, Rs 2.92 billion (9.25% of the budget) has been earmarked for fiscal transfers to local levels. The provincial government has allocated Rs 100 million (0.31% of the budget) for financial management.

The provincial government has allocated Rs 13.35 billion for the Ministry of Physical Infrastructure Development, Rs 3.9 billion for the Ministry of Land Management, Agriculture and Cooperatives, Rs 2.04 billion for the Ministry of Industry, Tourism, Forest and Environment, and Rs 6.74 billion for the Ministry of Education, Health and Sports.

Furthermore, the provincial government has earmarked Rs 100 million for a startup program aimed at fostering entrepreneurship among returning foreign workers. Additionally, Rs 5.68 billion has been allocated for road infrastructure development. Similarly, Rs 1.92 billion has been designated for water supply and sanitation, with plans to implement the Provincial Water Supply Project.