Govt mulls removing contingency budget allocation for sub-national levels

KATHMANDU, April 20: The Ministry of Finance (MoF) is considering excluding contingency funds—allocated for unforeseen circumstances—from the budgets of sub-national governments.

A meeting of the Inter-Governmental Finance Council and the Thematic Committee under the MoF has reached a consensus in principle on eliminating this budget category at the local and provincial levels. The council's recommendation follows a study report by the Office of the Auditor General (OAG), which found that the size of this unidentified surplus budget at both sub-national levels has been continuously increasing. The OAG report also highlighted that such funds are being widely misused.

The contingency budget is an amount set aside for uncertain expenses in the annual budget without being assigned to any specific program or project. The provision will remain mandatory for the federal government to address uncertainties such as natural disasters, epidemics, or other emergencies that may occur at any time. The council meeting is also considering reducing the size of the contingency budget for the federal government.

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The OAG report noted that funds allocated for contingency purposes at the sub-national levels have reduced the size of development budgets at the local level. "In the absence of transparency and accountability, such funds are being misused," the report states.

Under constitutional provisions, provincial and local governments are autonomous and remain key decision-makers on whether to maintain contingency funds in their annual budgets. Rural municipality and municipality councils have the final authority to decide, while at the provincial level, the Council of Ministers can make such decisions.

Last year, the Finance Committee of the Koshi Provincial Assembly also recommended that the provincial government exclude the contingent budget heading from its annual budget for fiscal year 2025/26.

According to a high-level official at the Ministry of Finance, removing the contingency budget would make relevant authorities more accountable for which programs receive funding, for whom, and how each rupee is spent. "It can also ensure how taxpayers' money is being utilized," the official said.