NNRFC Recommends Borrowing Limits for Federal, Provincial, and Local Governments

The National Natural Resources and Fiscal Commission (NNRFC) has recommended borrowing limits for the three tiers of government for the upcoming fiscal year 2025/26, aligning them with the country’s macroeconomic outlook and fiscal discipline.

According to the Commission, the federal government can mobilize internal loans up to 5% of the estimated Gross Domestic Product (GDP). Meanwhile, provincial and local governments will be allowed to borrow up to 12% of their total revenue, including internal sources and intergovernmental fiscal transfers—provided they follow legal procedures.

The Commission emphasized that internal borrowing should be directed exclusively toward capital-generating projects. These include projects with a strong internal rate of return, those evaluated through cost-benefit analysis in line with national development policies, and initiatives categorized as transformative or of national pride.

Previously, provinces included internal borrowing in deficit budgets without federal approval. The NNRFC now mandates that both provincial and local levels must complete structural and procedural arrangements before listing internal loans as a funding source in their budgets.

The Commission has further cautioned against using debt for current or administrative expenditures. It underscored that internal borrowing should focus on projects that promote production, employment, income growth, and long-term capital formation.

In line with the Intergovernmental Fiscal Management Act, 2074, the Commission reiterated that internal loans should only be presented in provincial and local budgets after securing federal approval.