The Crisis of Budget Delays in Nepal's Local Governments
When local governments fail to meet legally mandated budget deadlines, it creates a ripple effect across various sectors. Services stall, salaries remain unpaid, and development projects come to a halt. This failure also erodes public trust in the governance system. In 2024, 108 local bodies missed the deadline for endorsing their budgets, which was set for July 15. This is more than six weeks after the initial deadline of June 24. Out of the 753 local governments in the country, only 645 managed to meet this obligation, meaning that around 14% defaulted on their responsibilities. Nearly half of these defaulting bodies did not even hold their assembly meetings, highlighting a systemic issue.
This problem is not new but has become increasingly severe. It raises critical questions about the effectiveness of the lowest tier of Nepal’s federal system. The delays are most pronounced in Madhesh Province, where 53 out of 136 local governments failed to meet the deadline. Koshi follows with 16, Lumbini and Bagmati each with 12, and Karnali with 9. Gandaki and Sudurpashchim have 4 each. These consistent failures violate the Intergovernmental Fiscal Arrangement Act 2017, which limits the ability of local units to access federal grants and implement resources effectively.
Without approved budgets, these institutions cannot pay salaries, generate revenue, or carry out planned activities. This situation increases the risk of financial mismanagement. According to the Auditor General's Report for fiscal year 2023/24, local bodies had accumulated arrears totaling Rs 25.32 billion, out of a national total of Rs 733.19 billion. Among the 5,759 institutions flagged for arrears, 761 were related to local bodies.
Most of these delays stem from political disagreements within local councils. When elected representatives cannot agree on who controls what, financial planning becomes a secondary concern. In some cases, local executives attempt to push budgets without consensus or avoid holding meetings altogether. Opposition parties may boycott sessions to disrupt proceedings. The problem is exacerbated when provincial or federal actors remain silent or delay necessary interventions. Even with a legal framework in place, the lack of enforcement has created a culture of impunity.
Federalism is meant to bring government closer to the people, making it more responsive and efficient. However, budget planning delays raise serious concerns about whether local representatives are fulfilling their responsibilities. When local bodies fail to meet basic requirements, it sends the wrong message. Citizens begin to feel that the system exists only for those in power, not for the people they represent.
For many citizens, these missed deadlines symbolize weak governance rather than effective decentralization. Solving this issue requires more than short-term visits or fact-finding missions. There must be a clear provision that if a local body fails to pass a budget on time, the Chief Administrative Officer (CAO) can step in with a temporary budget for essential services. This should be followed by a mandatory review and disciplinary action if political actors are found to have intentionally stalled the process.
Federal and provincial governments must stop treating these lapses as routine and address them with the seriousness they deserve. If the lowest units of government repeatedly fail to carry out their basic duties, it will lead to a gradual erosion of public trust in federalism. To safeguard the very principle of federalism, local governments must take responsibility and clean up their act.