Kathmandu, June 14

The provincial governments will present their provincial budget for fiscal year 2018-19 on Friday in their respective provincial assemblies.

As per the provision of the Intergovernmental Fiscal Management Act, the provincial governments have to present their budget in the provincial assemblies by mid-June and local bodies have to present their budget in the local assemblies 20 days ahead of the fiscal year calendar.

Provincial governments rely on fiscal transfer from federal government, revenue shared from the divisible fund and their own revenue sources (both tax and non-tax) to finance the budget. While the provincial governments can raise domestic debt to finance their budget, they have to obtain approval from the federal government to do so.

The provincial governments can also mobilise foreign grants as a source of budget financing following the approval of the federal government, as per the provision of the Intergovernmental Fiscal Management Act.

The federal government has allocated funds for fiscal transfer to the provincial governments. Equalisation grant will be transferred in four instalments to the provinces every quarter. Similarly, the federal government will transfer one-fourth of the grant at the beginning of the fiscal and other three tranches will be transferred at the start of the next three quarters based on the performances of expenses to sub-national governments, according to Nirmal Hari Adhikari, chief of Budget Division at the Ministry of Finance.

Similarly, a total of Rs 60.42 billion in revenue is shared with the provinces directly from the divisible fund operated by the Financial Comptroller General Office (FCGO). Out of the total value added tax and domestic excise, 15 per cent will be transferred to provinces and the amount will be shared with every province equally. Apart from this, the federal government has allocated Rs five billion each as matching grant and special grant for next fiscal.

Apart from this, royalty from mountaineering, forests, mines and minerals, water and other natural resources will also be shared with the provinces. The provinces will get 25 per cent of the total royalty and such royalty will be available only for the affected areas of the provinces.

The planning and finance ministers of each province will present the province appropriation bill and province financial bill to the provincial assemblies, according to Laxman Aryal, provincial chief secretary of Province 4. “Province 4 has been preparing to present the budget with medium-term expenditure framework (MTEF).”

Provinces have a right to levy registration tax and vehicle tax as per the provision of the constitution.