Ministers for Economic Affairs from all seven provinces have jointly called on the federal government to increase fiscal equalization grants in line with the growth of the federal budget and to make the grant distribution process more transparent, predictable, and stable throughout the fiscal year.

Issuing a ‘Hetauda Declaration’ after a national workshop on “Strengthening Fiscal Federalism and Future Directions” in Hetauda, they emphasized that fiscal federalism—the cornerstone of Nepal’s federal structure—cannot function effectively unless provinces receive timely and adequate financial transfers from the federal government. They said that inconsistencies in grant allocation and mid-year cuts have hampered provincial planning and implementation of development projects.

The declaration was signed by Minister for Economic Affairs of Koshi Province Ram Bahadur Magar; Chief Minister and Minister for Economic Affairs of Madhesh Province Jitendra Sonal; Minister for Economic Affairs and Planning of Bagmati Province Prabhat Tamang; Minister for Economic Affairs of Gandaki Province Dr. Takaraj Gurung; Minister for Economic Affairs of Lumbini Province Dhanendra Karki; Minister for Economic Affairs of Karnali Province Rajiv Bikram Shah; and Minister for Economic Affairs of Sudurpaschim Province Bahadur Singh Thapa.

“The federal government’s annual budget has grown steadily, but fiscal equalization grants to provinces have not kept pace,” the ministers said. “We urge the federal government to increase the grant proportionally, ensure transparency in allocation, and refrain from reducing any form of grants during the fiscal year.”

The gathering discussed the financial challenges faced by provinces, including delayed budget disbursement, limited revenue authority, and frequent changes in grant formulas. The provincial economic affair ministers added that unpredictable grant flows were disrupting essential service delivery, delaying capital expenditure, and weakening local fiscal discipline.

The ministers also raised concerns about the lack of clarity in intergovernmental fiscal transfers and the need for better coordination between federal, provincial, and local governments. They stressed that fiscal equalization grants should be distributed based on clear, evidence-based criteria that reflect population size, development needs, and geographic disparities.

The meeting also called for reforming the existing fiscal transfer system to strengthen fiscal autonomy at the subnational levels. The ministers urged the National Natural Resources and Fiscal Commission (NNRFC) to play a more active role in ensuring equitable resource distribution and monitoring compliance with constitutional principles of fiscal federalism.

The joint gathering concluded with a commitment from all seven provinces to present a unified stance on fiscal decentralization in future discussions with the federal government.