Stakeholders say that the failure to transfer the financial powers stipulated by the constitution on time has added challenges to implementing inclusive governance at the provincial and local levels.
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Stakeholders have pointed out that the failure to effectively implement fiscal federalism even after eight years of federalism has increased the risk of inclusive governance being limited to policy slogans.
They conclude that the federal government is not transferring the financial powers guaranteed by the constitution to the provincial and local levels on time, making it difficult to achieve the core essence of federalism, equality, social justice and balanced development. In an interaction on the role of provincial and local levels organized by the Faculty of Law of Kathmandu University and Manmohan Technical University in Biratnagar on Saturday, economists, lawyers, policymakers and community representatives emphasized that inclusive governance is not possible without fiscal federalism. They warned that democratic practice will be weakened if resources, means and decision-making rights do not reach the grassroots level.
Financial federalism expert Dr. Dilnath Phuyal clarified that political and administrative rights alone will not be the basis for the success of federalism. Stating that the essence of fiscal federalism is the clear division of tax collection, budget preparation and expenditure between the federal, provincial and local levels, he said, "Even after eight years, it is a serious issue that fiscal federalism appears weak in practice. Without financial self-reliance, the state levels are not able to fulfill their responsibilities."
Economist Dr. Pramod Kumar Jha said that fiscal federalism is a process of exercising common financial rights granted by the constitution. Citing examples of countries like South Korea and China achieving rapid development through effective use of fiscal federalism, he opined that the federation should not delay in delegating powers to the provinces and local levels. ‘If we too can use fiscal federalism correctly, we can bring prosperity to every village,’ he said.
Koshi Province Planning Commission Vice-Chairman Taranath Niraula said that the essence of inclusive governance lies in the equal participation of all classes, castes, genders, communities and regions. He said that the provinces and local levels should be financially capable of running programs targeting Dalits, indigenous peoples, women, Madhesis, Muslims, people with disabilities and citizens of remote areas. ‘If fiscal federalism is strong, it will be easier to select plans according to local needs, allocate targeted budgets and spend in a participatory manner,’ he said.
Province MP Sapna Pariyar said that the lack of Dalit ministers at the cabinet level despite nine changes of government in eight years in Koshi Province is an example of the failure of inclusiveness within federalism. She mentioned that it is worrying that elected representatives through inclusive representation are not reaching the leadership level and that their voices are not being heard effectively even in parliament. ‘Fiscal federalism should be a priority for the first claimants of rights,’ she emphasized.
Advocate Jivesh Jha said that only through inclusive governance can equalization, conditional and special grants be spent in a targeted manner on vulnerable areas and communities in accordance with the essence of fiscal federalism. He said that this will help reduce geographical and social inequality.
Dinesh Shrestha, a leader from Biratnagar, commented that even though the constitution has allocated tax rights, the provinces and local levels are facing financial discrimination as the main revenue source is still concentrated in the union. ‘The implementation of inclusive governance has become challenging due to being forced to depend on limited resources,’ he said, ‘The union should transfer the financial rights mentioned in the constitution soon.’ The conclusion of the discussion was that the full implementation of fiscal federalism is no longer an option but a necessity to preserve the credibility of the federal structure and put inclusive governance into practice.
