Experts and political leaders have criticized the recently unveiled federal budget for Fiscal Year 2025/26, calling it inadequate in promoting fiscal federalism and devolution of power to provincial and local governments.
Speaking at a programme titled “Budget from a Federal Lens” organized by the Federalism and Localization Centre in Kathmandu on Monday, speakers argued that the budget continues to reflect a centralized governance mindset, failing to align with the constitutional spirit of federalism.
Upendra Yadav, Chairman of the Janata Samajbadi Party, said the budget was prepared in the style of a unitary system and marginalized sub-national governments. “Provincial and local governments have been deprived of resources. Budget allocation is still determined based on access to power centres and political influence,” he remarked.
Former Finance Minister Barshaman Pun warned that without the effective implementation of a project bank, the overall planning and management of projects would suffer. “Although the government can select projects based on long-term strategies, political leaders and ministers often override them with their own priorities,” he noted.
Chairman of the Finance Committee of the House of Representatives, Santosh Chalise, stated that the committee had extensively discussed budgetary issues, and many of its recommendations were incorporated. However, he acknowledged the overdependence of provinces and local levels on the federal government. “Such dependency is not sustainable in the long run,” he said.
National Assembly member Kamala Pant described the budget as “average” but raised concerns over resource mobilization for effective implementation. “The budget does not reflect financial discipline, despite repeated suggestions from auditing agencies,” she said. Pant also questioned the feasibility of achieving the Sustainable Development Goals (SDGs) within four years under the current plan.
Former lawmaker Dil Kumari Thapa Rawal criticized the budget for failing to address critical issues related to the implementation of the constitution and federalism. “Political federalism alone is not enough—we need strong fiscal federalism as well,” she said.
Dr. Khim Lal Devkota, former National Assembly member and Chairman of the Federalism and Localization Centre, said the budget strays from the federal structure envisioned in the constitution. “Despite exclusive rights granted to provincial and local governments, implementation remains weak,” he said. As an expert on fiscal federalism, Dr. Devkota added, “The revenue system still follows a centralized model. The federal government has made arbitrary cuts to equalization grants while imposing excessive conditional loans, undermining the autonomy of sub-national governments.”
House of Representatives member and CPN-UML leader Yogesh Bhattarai admitted that most political parties have not fully embraced federalism in practice. “They continue to operate from a centralized perspective,” he said.
Former Secretary Bidyadhar Mallik noted that the budget overlooks the needs of the poor. “The government must ease the conditions attached to conditional grants,” he urged.
Sunita Dangol, Deputy General Secretary of the Municipal Association of Nepal, pointed to a persistent vertical imbalance in Nepal’s fiscal federalism, calling for structural reforms to address the gap. -- RSS
