Government Prepares to Increase Performance-Based Share in Fiscal Equalization Grants

The National Natural Resources and Fiscal Commission is preparing to increase the performance-based portion of fiscal equalization grants to 5–7% for the upcoming fiscal year 2082/83. The commission’s evaluation of the current year revealed that no province scored above 50% in performance assessment, highlighting significant inefficiency and negligence in local and provincial governance.

Arghakhanchi’s Panini Rural Municipality topped the performance evaluation with 83.84 points, while most local governments in the Madhesh Province scored poorly. The commission noted that higher-performing provinces and local units would receive a larger share of grants, encouraging accountability in fund utilization.

Acting Chairperson Juddha Bahadur Gurung stated that the commission is focused on raising the performance-based allocation without affecting other evaluation criteria. “We are discussing raising the share to 5, 6, or 7 percent to enhance accountability at the local and provincial levels,” he said.

The commission evaluates local and provincial governments based on three grant components: minimum grant, formula-based grant, and performance-based grant. For the current year, the minimum grant accounted for 25% of the total equalization fund for provinces and 34.35% for local governments. By increasing the performance-based share, the commission aims to incentivize better planning, budgeting, and implementation of government programs.

Performance assessments consider a wide range of indicators, including timely allocation and expenditure of budgets, revenue mobilization, audit compliance, online reporting, quality of education, health services, environmental management, and public service delivery.

Among municipalities, Biratnagar Metropolitan City topped the performance chart with 78.11 points, while Kathmandu Metropolitan City scored the lowest among major cities with 44.97 points. Among sub-metropolitan municipalities, Butwal Sub-Metropolitan City led with 64.44 points, whereas Itahari Sub-Metropolitan City scored the lowest at 38.96 points.

Acting Chairperson Gurung emphasized the importance of training local officials in effective budget allocation, spending, and monitoring, given that elected leaders in municipalities serve a minimum five-year term. The commission believes that increasing performance-based funding, along with capacity-building initiatives, will strengthen governance and ensure efficient use of public resources across all levels of government.