Laxmi Capital News
US$ 200 million World Bank credit to finance federalism draws flak

TheWorld Bank’s credit of US$ 200 million (Rs 20.6 billion) to Nepal for financingfederalism in the country has landed into controversy. The country’s fiscalpolicies and plans have a priority of receiving development assistance for megainfrastructure projects such as expressway, railway, and hydropower plants, butthe credit amount approved by the bank’s board of directors on Tuesday is against such policies. 

Thiscredit is sufficient to finance a hydropower plant of above 140 MW or buildinga major national highway. But the bank has decided to allocate it to make lawsand build institutions, which will not have any impact in the development ofthe country, according to experts and former bureaucrats.

Accordingto the bank’s press statement, the support is toward implementingintergovernmental fiscal arrangement act, establishing national naturalresources and fiscal commission, and adopting fiscal responsibility and budgetmanagement bill. The other purposes of this loan is for strengthening public financialmanagement systems, making improvements in budget execution, and improvingrevenue collection. 

“It’snot appropriate to receive credit for things such as making and implementinglaws or establishing institutions as stated in the press statement,” saidKrishna Gyawali, former government secretary who also worked with theInternational Economic Cooperation Coordination Division at the Ministry ofFinance. 

Criticshave long been blaming that allocating credit to such activities is meant tobring in foreign experts who take away most of the money in lucrative salaries,leaving the country’s needs unfulfilled. 

“Ourdevelopment cooperation policy has clearly stated that the country is in needof financing of mega infrastructure projects such as railways and expressways,and not such policy supports,” added Gyawali. 

KewalPrasad Bhandari, chief of International Economic Cooperation CoordinationDivision at the Ministry of Finance, has defended the bank’s decision, statingthat the credit is not for federalism. But contrary to his claim, the bank’sstatement has stated that the financing is for ‘establishing a framework forfiscal federalism and improved public financial management.’  

Inresponse to the tweets by critics criticizing financing federalism, Bhandariclaimed that the credit was for public financial management. However, he didnot clarify as to why such financing was endorsed by the bank’s board ofdirectors. Bhandari did not respond to repeated phone calls and text messageson the matter. 

Bhandarihas criticized the media for ‘misreporting’ on the matter, referring to areport published by BBC Nepali Sewa.  Approval by the Government of Nepalis needed before entering into the project implementation. 

Accordingto concerned officials, similar policy supports were received from the WorldBank for drafting procurement laws such as Public Procurement Act 2007 andPublic Procurement Rules, and setting up Public Procurement Monitoring Officein 2007. Some bureaucrats are of the view that the Act is one of the mainreasons behind poor contract management as policies were framed in a way tostrengthen the private sector and weaken the monitoring body.

Commentingon the issue, infrastructure policy expert Surya Raj Acharya said: “If this istrue, it is unfortunate. The country should stop receiving any assistance formaking laws and policies, which is the priority of donors, not the people ofNepal.” 

“Makingpolicies and plans through foreign assistance have only weakened the governmentagencies including implementing bodies,” added Acharya, who is also thespokesperson of BibeksheelSajha Party. 

Asimilar public finance management project, financed by different developmentpartners including the World Bank, is currently under operation through theMinistry of Finance. 

Meanwhile,the bank has also approved a US$ 66 million credit to modernize Phase 2 of theRani JamaraKulariya Irrigation Scheme. The project, which experts say falls inline with the government’s policy on receiving foreign assistance, will modernizesub-branches, tertiary canals and water courses so that the irrigation watercan reach farmers’ fields with optimal flow.

Source: My Republica, 24th March, 2018


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