The Bhutanese Leading the way.
The government has allocated Nu 47 billion (bn) for local governments, including dzongkhags, gewogs and thromdes, in the 2026–27 fiscal year, marking an increase of 23.6 percent from FY 2025–26.
Of the total allocation, Nu 29.27 bn, or 62.3 percent, has been earmarked for capital expenditure, focused on infrastructure development. The remaining Nu 17.73 bn has been allocated for current expenditure to support routine administration by local governments.
Dzongkhags will receive the largest share at Nu 14.18 bn. Thromdes have been allocated Nu 2.58 bn to support urban services and municipal operations, while gewogs will receive Nu 971.4 million for grassroots governance and local administration.
A total of Nu 8.66 bn has been allocated as capital block grants to enable local governments to implement development activities under the Local Government Key Result Areas of the 13th Five-Year Plan.
The allocation also includes a two percent enhancement over the approved ceiling of 25 percent under the Resource Allocation Framework for FY 2026–27. The increase is intended to help dzongkhags implement health-related programmes following the bifurcation of the National Medical Services budget between cluster-level facilities and dzongkhag health facilities after the implementation of Transformation 2.0 in the health sector.
The total block grant further reflects adjustments for front-loaded activity budgets allocated above the approved ceilings during FY 2024–25 and FY 2025–26, allowing local governments greater flexibility to prioritize investments based on local needs.
The Performance-Based Grant system for gewogs will continue, linking funding to the achievement of Key Performance Indicators to promote efficient resource use and better development outcomes.
In addition, Nu 344.9 million has been allocated under central agency plans, including funding from the Ministry of Education and Skills Development for WASH facilities and Early Childhood Care and Development centres, the Department of Tourism for local economy and tourism initiatives, and the National Medical Services for health infrastructure.
Project-tied allocations amounting to Nu 5.18 bn will be financed through external funding, including High Impact Community Development Projects and other donor-supported initiatives.
The government has also allocated Nu 15.09 bn for centrally executed capital programmes benefiting local governments. These projects will be implemented by central agencies to achieve economies of scale, technical specialization and adherence to national standards.
