Provincial Governments Show Rs 21 Billion Surplus – Local Balance Improves by Rs 36 Billion

Nepal’s provincial and local governments demonstrated strong fiscal discipline during the first two months of the fiscal year 2025/26, according to the Nepal Rastra Bank (NRB)’s latest Government Budgetary Operation Report. The data reveal that while the federal government recorded a deficit, both the provincial and local levels maintained positive fiscal balances, contributing to overall stability in the country’s public finances.

The provincial governments collectively posted a budget surplus of Rs 21.03 billion, with total resources amounting to Rs 25.15 billion against expenditure of Rs 4.12 billion. This reflects efficient fiscal management and slower capital expenditure execution at the subnational level. The majority of provincial revenue—Rs 18.61 billion—came from grants and transfers from the federal government, supplemented by Rs 6.54 billion in locally raised revenues and deposits.

Simultaneously, the local governments recorded an improvement in their fiscal position, with a net positive balance of Rs 36.49 billion, compared to Rs 22.63 billion in the same period last fiscal year. This increase indicates that local bodies have accumulated significant funds, largely due to unspent budget allocations and delayed implementation of development projects.

Combined, the subnational (provincial and local) levels contributed over Rs 57 billion in fiscal surplus, offsetting part of the federal government’s Rs 23.96 billion deficit. The general government’s cash balance (including all tiers) reached Rs 255.61 billion by mid-September 2025, reflecting strong liquidity but also highlighting the need for faster project execution and capital investment at the local and provincial levels.

Economists view the subnational surplus as a short-term indicator of stability but caution that persistent underutilization of development budgets could limit infrastructure and service delivery outcomes. They stress the importance of improving coordination among federal, provincial, and local administrations to ensure timely budget implementation and economic impact.