This study discusses central government grants; showing their effects on local government operational efficiency and effectiveness in Zambia. The Movement for Multiparty Democracy (MMD) government, with a view to improving local government operational efficiency and effectiveness, enacted a new local government Act in December1991, replacing the local administration act of 1980. The study reveals that whilst the 1991 local government Act provides for all local authorities to receive grants from central government, the situation obtaining in Zambia’s Third Republic is that the government decided to ignore its statutory obligation to provide funding to councils. Therefore, local councils in Zambia have remained chronically short of money to the extent that they are unable to buy and maintain vital equipment; many of them have been unable to pay salaries and wages on time; and services to the local communities have not been adequately delivered or even not delivered at all. The study has shown that even though stringent measures and various local initiatives have been taken the gap left by non-provision of grants is difficult to be filled by the local authorities’ own revenue.