DCCs, local levels told not to accept foreign aid without approval

The Ministry of Federal Affairs and General Administration has issued a circular to all district coordination committees (DCC) and local levels not to accept assistance or loans from foreign agencies, development partners, communities or investors without consent of the federal government.
In a response to a letter from the Finance Ministry citing a recent decision of the cabinet, the ministry has urged DCC and local levels to abide by the constitutional provisions and other existing laws related to exclusive and concurrent powers of all three tiers of government.
The constitution – Article 59 (6) – reads that the Government of Nepal shall have power to obtain foreign assistance and borrow loans, which means only the federal government has the right to accept the foreign assistance and borrow loans. “Such assistance or loans shall be obtained or borrowed to maintain macroeconomic stability of the country,” the article reads, adding that Clause 7 of Schedule-5 has set down the matters related to international treaties or agreements, extradition, mutual legal assistance and international borders and transboundary rivers as the exclusive power of the federal government.
According to Section 12 of the Inter-governmental Fiscal Arrangement Act-2017, provincial and local governments shall not obtain any form of foreign grant or assistance or implement or make to implement any plans or programmes with the foreign grants or assistance, without prior consent of the federal government, the circular reads.
The Finance Ministry has requested the Ministry of Federal Affairs and General Administration to issue a circular to all the DCC and local levels in conformance with the November 15 decision of the cabinet, citing that there was the possibility that foreign assistance and loans would be accepted without bringing it to the knowledge of the federal government,” according to the Development Assistance Coordination Section under the Ministry of Federal Affairs and General Administration.
The central government has became very cautious about the issue after some local levels were found to be planning to sign agreements with foreign development partners for assistance and loans by keeping the federal government in the dark.
The federal government can accept foreign grants and assistance for plans or programmes to be implemented by the provincial and local governments.

Local governments present budget for next fiscal year

Following the federal and provincial budgets, most of the local bodies presented their budgets in the municipal assemblies today. A few urban and rural municipalities have presented their budget ahead of the final deadline that is today.
According to the provision of the Intergovernmental Fiscal Management Act, local governments must announce their budgets in their respective assemblies by Asadh 10 of the Nepali calendar, some 20 days before the beginning of the new fiscal year. Based on the law, most of the metropolises, sub-metropolises, urban and rural municipalities have presented their budgets in the municipal assemblies today.
The Ministry of Federal Affairs and General Administration (MoFAGA) – in coordination with the Finance Ministry – had forwarded a circular to all the local bodies to present their budget by Asadh 10. But some 100 municipalities failed to present their budget by today’ deadline, according to the law. In the current fiscal year some 25 municipalities have failed to bring the budget, some 40 local governments had announced their budget without presenting ‘Programmes and Policies’.
Those municipalities, which were unable to present their budget today’s deadline will face problems in receiving the grant provided by the Finance Ministry, according to the joint secretary at the Federal Ministry Jaya Narayan Acharya.
Among six metropolis, Kathmandu Metropolitan City has presented a budget of Rs 15.50 billion – which is the largest among all the 753 local governments – for the next fiscal year. Likewise, Pokhara metropolis has presented a budget of Rs 7.54 billion, Lalitpur Rs 5.17 billion, Biratnagar Rs 5.12 billion, Birgunj Rs 4.48 billion and Bharatpur has presented a budget of Rs 3.37 billion for the next fiscal year. Likewise, Hetauda sub-metropolitan presented a budget of Rs 1.81 billion for the fiscal year 2019-20.
The local governments will finance their budgets through their own revenue, grant transferred from the federal and provincial governments, revenue shared from the federal government and provincial governments and through internal debt, according to the Constitution.
The total of 753 local governments will be able to mobilise revenue – shared from the divisible fund and calculated according to the formula prepared by the National Natural Resources and Fiscal Commission – worth Rs 65.45 billion for next fiscal 2019-20. They will directly get 15 per cent of the total value added tax (VAT) and internal excise, apart from 25 per cent royalty collected from mountaineering, electricity, forest, mines and minerals, water resources and other natural resources, according to the Constitution.
Likewise, the federal government will transfer a total of Rs 89.93 billion as equalisation grant and Rs 123.87 billion as conditional grant to the local governments. The provincial governments will also transfer grants to the local governments, under fiscal transfer.
Grants from the federal government are transferred in four tranches – every quarter – from the beginning of the fiscal year in mid-July. The federal government has increased grant amount to local bodies by Rs 18.77 billion to Rs 213.82 billion for fiscal year 2019-20.
The federal government transfers 40 per cent of the conditional grant in the beginning of the fiscal year and the remaining amount is transferred based on the performance of the expenses.
According to the National Natural Resources and Fiscal Commission, equalisation grant has been allocated based on the need of development in local governments including multidimensional poverty, socioeconomic discrimination and status of infrastructure development in local units.
The National Natural Resources and Fiscal Commission is the constitutional body that recommends required fiscal transfer to sub-national governments and manages the utilisation of natural resources in an undisputed manner but this year, according to the commission sources, the Finance Ministry has overruled the commission’s authority in budgetary process.