And when it comes back next year it will “relocate to Inishowen and Derry as part of the 2013 Derry-Londonderry City of Culture.”
The event has been held in Gortahork for the past six years and attracted some top class productions.
It now means Gortahork and the surrounding areas will suffer a major tourism loss for the next two years.
Organisers say their plan is to base next year’s festival in as yet unspecified location in Inishowen and run shows both there and in Derry.
They have blamed the lack of funding for their inability to stage this June’s festival.
“It will be sad for Guth Gafa to leave Gortahork where support from the community, and especially Ostan Loch Altan, has been great over the past six years, but we hope that we can pull off an even bigger and better event for the people of Donegal in our new location, and also support the people of Derry in their most exciting year as UK City of Culture, ” said Festival Director, Neasa Ní Chianáin in a statement.