How to support Nepal’s local democracy?

Kushal Pokharel

Kushal Pokharel

How to support Nepal’s local democracy?

Various studies estimate that Nepal needs around $8 to $11bn from 2020-2025 for implementing federalism

Nepal’s recent transition from unitary to federal setup offers a historic opportunity for the local governments to provide improved service delivery and encourage development at the local level. Amid increasing demand for resources in the restructured and extensive government system,  development partners have a crucial role to play in  strengthening administrative and financial capacities of the local governments to deliver and manage services and promote sustainable and inclusive development.

Various studies estimate that Nepal needs around $8 to $11bn from 2020-2025 for implementing federalism. While the new constitution provides significant power and authority to the local governments development and public service delivery (health, education and disaster, etc), limited financial resources have been provisioned. The budget speech of the current fiscal year 2022-23 estimates a total  collection of  Rs 1152.42bn revenue out of which only Rs 163.03bn will be shared with provincial and local governments.

The demand for resources continues to  increase at the sub-national level. Having said that, Nepal’s international development cooperation is governed by the center with the constitution offering no rights to the provincial and local governments to take foreign aid directly. The subnational governments can formulate laws on financial rights, set their own budgets, make decisions, devise plans and policies in matters within their jurisdiction. However,  they are  barred from signing aid agreements with donors without the consent of the federal government.

Keen to help

Nevertheless, development partners have been keen to support Nepal’s transition to federalism. In a bid to assist the rollout of the new federal system, some development partners have been involved in legislative support and public finance management activities at the provincial and local governments while others have been  interested in strengthening human and institutional capacities of sub-national governments to deliver services with a focus on gender and social inclusion.  For instance, the Swiss Agency for Development Corporation’s State Support Program aims at building systems, institutions and capacities at the sub-national level. The Provincial and Local Governance Support Program (PLGSP), a multi-donor program, has two-fold objectives: developing robust provincial and local governance systems and procedures and intergovernmental relationships and fostering capacities of provincial and local governments to deliver services.

Interest of development partners to work in direct partnership with the local governments is also increasing but the current policy provisions and institutional arrangements for channelizing  development cooperation  is heavily centralized.  All the project agreements made at the central through the Ministry of Finance and approved by the Social Welfare Council can only go to the local level that too with the consent of the central government. Having said that, an increasing number of MoUs between local governments and international non-governmental organizations are taking place. While programmatic collaborations are happening,, there is no direct mechanism for the donor’s fund being transferred to local governments.

Existing policy provisions pertaining to international development cooperation are at odds with the spirit of the reform agendas. In this regard, the Development Cooperation Policy 2019  allows   the local government only to forward project proposals after identifying local priority projects for the consent of the provincial or federal government. The policy, however, has the provision of  conditional  grants to the local and provincial governments through the national budget system; local and provincial governments are strictly forbidden from obtaining foreign loans.

Devising systems to facilitate the one-lending and on-granting of foreign assistance by the Federal Government to State and Local Governments calls for revisiting existing policies and arrangements on resource needs allocation, project preparation, project financing and implementation agreements, including arrangements for fiscal transfers and accountability mechanisms.

Development partners have the opportunity to invest in building the capacities of local government leaders and socio-economically marginalized groups such as women, Dalits and minority communities in village/municipal executive and assembly for executing their functions effectively. Entrusting the local governments to lead the projects for improved delivery, resource mobilization and intended outcomes will be significant to enhance their ownership. From training and capacity development to public finance management, intergovernmental fiscal relations, and support for the development of a strategy for implementation planning, development partners’ roles can be pivotal.

The author is an independent researcher and freelance columnist based in Nepal. His research interests include contemporary issues of development and governance with focus on local democracy and decentralization


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