As the Ministry of Finance starts preparations for formulating budget for the new fiscal year BS 2076-77, lawmakers from different political parties have been lobbying for continuation of the controversial Constituency Development Fund (CDF).

CDF has been practiced in some of the South Asian and African developing countries, but the experience of such parallel funding arrangement has not been positive. In many instances including Nepal, there are negative impact on accountability and service delivery.

However, the lawmakers could not resist the temptation of managing and spending budget, which is not their job. They should rather focus on their primary task of law-making and policy formulation. Further, they should carry out the oversight functions to provide critical feedback and hold the executive accountable for the implementation of the budget.

Some of the lessons from national and international contexts:

• CDF violates the key democratic principle of separation of power by giving the executive function of budget execution on the legislature. There is potential conflict of interest in continuing CDF, and possible conflict between local government and central government.
• CDF violates the ideal of devolution and vertical separation of power. The local government units will not be adequately resourced and empowered, thus weakens federalism.
• CDF has regressive effect on development as it divides the scares resources equally between constituencies, not taking into consideration of the need and potentiality. A number of studies have confirmed that the project selection under CDF is often driven by political interest rather than benefiting the most poor and disadvantaged communities.
• CDF support ad-hock projects and does undermine coherent local government strategy and programs to address underlying causes of poverty and inequality.
• Lack of monitoring mechanism and internal audit of government function will further promote financial irregularities in such a loosely managed fund, which is not a part of structured fund-flow mechanism.

Overall, CDF does not strengthen the lawmakers, rather it will distract them from their core responsibility and instead make them accountable to the executive. CDF risks compromising the integrity of both the legislature and the executive.

We do not need CDF. Let us make the local governments stronger in the spirit of devolved authority, downward accountability, and inclusive development. Let us strengthen oversight role of legislature in results-based monitoring and financial compliances. Let us strengthen public financial management systems including internal controls and procurement at all levels.

Author: Dr. Prabin Manandhar is an expert of international development. Currently, he is working as Country Director of The Lutheran World Federation. He is the Former Chair of the Association of International NGOs in Nepal (AIN). He is also a visiting faculty at the Kathmandu University. He can be reached at prabin.manandhar11@gmail.com