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Development partners to be asked to spend funds through local units

Published On: June 4, 2017 01:45 AM NPT By: Rudra Pangeni  | @rudrapang

KATHMANDU, June 3: The government is mulling over requesting development partners for delegating projects being implemented with foreign assistance to local units.

Officials of the Ministry of Federal Affairs and Local Development (MoFALD), say that the government wants to change the existing modality of engagement of development partners in several districts, asking them to channel their assistance through basket funds of local units.

The government is likely to hold discussion on the issue with development partners within couple of weeks.

The Ministry of Finance has also said that it was devising a separate guideline on fiscal transfer of foreign assistance. 

According to the constitution, only the central authority can decide on receiving foreign loans and grants. Likewise, provincial governments can receive foreign assistance only after getting permission from the central government. However, the constitution is silent on how the local units can receive foreign assistance. 

Constructing office building for about 400 local units, small road projects to connect each ward to the office of rural municipality and municipalities, and school mapping and planning schools for next 20 years are the set priorities of local government. Their other priorities are building health posts and health centers, agriculture and irrigation facilities, and building capacity building of newly elected units.

“We will request development partners to contribute their assistance in the priority projects of local governments by transferring their funds in the basket of local units,” Mahesh Bhattarai, an under-secretary of MoFALD, said.

Additional funds by development partners will increase budget of local units. 
The government has allocated Rs 225 billion, or 17 percent of the total annual budget, to 744 local units as part of the fiscal transfer by implementing the federal structure. Bhattarai said that they will identify demands of local units and match the funds provided by the donors accordingly.

Baikuntha Aryal, who heads the International Economic Cooperation Coordination Division of the MoF, said that the ministry was making a guideline for fiscal transfer of foreign assistance. “Implementation of standalone projects is not difficult. We can select local units for the program supports provided by the donors,” added Aryal. 

But the finance ministry is not clear about the project implementation modality. They are not clear whether such standalone projects and program supports can be directly handed over to local bodies. 

Currently development partners have been criticized for being engaged in too many projects and in several districts. Transfer of resources from the development partners to local units for projects and programs, which can be implemented by local governments, is expected to make foreign assistance spending more effective.

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