Gelephu Member of Parliament Harka Singh Tamang has raised concerns over what he sees as increasing restrictions on the flexibility and autonomy of Local Governments (LGs), despite constitutional and legal provisions that allow them to set priorities and use annual grants independently. He argued that the current Resource Allocation Formula and the practice of withholding 30 percent of funds under performance-based mechanisms have reduced predictability, limited discretion, and delayed the execution of local development initiatives. He asked the government what reforms were being considered to allow more flexible fund disbursement in line with the intent of decentralisation.
Responding to the question, the Ministry of Finance stated that existing laws fully empower LGs to plan and implement development activities. It explained that LGs prepare Annual Work Plans aligned with Local Government Key Result Areas and the 13th Five-Year Plan, while allocations are guided by the Resource Allocation Framework using objective indicators such as population, poverty, and geographic needs. The ministry added that LGs can adjust spending priorities within their Capital Block Grants as long as they align with national objectives. To balance autonomy with accountability, it said the performance-based grant system promotes efficiency and responsible fund use. The ministry further noted that withheld funds are released within the first quarter and reaffirmed its commitment to strengthening LG financial management capacity.
