The proposal to reintroduce the Fund was submitted by the internal committee of the parliament during the 1st Session of the Fourth Parliament
The Finance Ministry has submitted their review report to the National Assembly (NA) on the resumption of Priority Development Fund (PDF), shelving out various implications if the fund is to be reinstated.
While the implementation of the PDF (erstwhile constituency development grant) seeks to foster collaboration between the members of parliaments (MPs) and their constituencies and ensure that adequate funds are allocated for development activities, particularly in remote areas, the Finance Ministry came out with more loopholes than one in their six-page report.
Potential Issues in Legislative Roles
The PDF modality contravenes Articles 1.13, 10.2, and 22.1 of the constitution, which mandate the separation of powers, define MP’s responsibilities, and establish decentralization policies respectively.
Further, the Public Accounts Committee (PAC), composed of MPs, is tasked with scrutinizing public fund use by the executive and judiciary. “If MPs are involved in implementing public funds, it would compromise the PAC’s oversight role and integrity. This dual role could burden MPs with additional responsibilities, hindering their ability to effectively perform their legislative functions,” the review stated. LG Capacity in Budget Execution
It was stated that the PDF scheme may strain LG’s already limited human resources, potentially affecting the quality and monitoring of capital works. The CDG, with Nu 174.36M allocated from FY 2099-2011 saw only Nu 152.50M utilized, leaving Nu 21.86M unutilized (12.53% of the budget). This indicated capacity issues in Gewogs, leading to blocked funds that could otherwise be used for emerging priorities.
“Addressing these capacity issues is crucial to ensuring efficient budget utilization and effective local development,” the review stated.
Budget Fragmentation and Proliferation of Activities
As per Royal Audit Authority (RAA) and Anti Corruption Commission (ACC) reports in 2012, ‘equal amounts of grants were being allocated as an entitlement without considering the priority/ urgency of the activities. Factors such as poverty level, population size, geographical coverage of the gewog, and level of economic development were not considered when allocating the grant’. The review stated that “considering these parameters may promote equitable distribution of grants and balanced regional development across the country”, and that factor such as disparity in needs, regional inequality, and resource strain and capacity issues be looked upon when distributing the grants to each constituency.Non-compliance with CDG Guidelines
Despite the introduction of CDG Rules/Guidelines 2009 and 2014 to streamline CDG activities, the review team found that several provisions were not followed by MPs and project executing agencies. The RAA 2012 performance audit report highlighted pertinent financial issues like MPs approving funding for non-permissible items under Section 7 (such as the purchase of school buses, boatman salaries, and government staff quarters renovations), funding was approved for 30 activities across 15 constituencies that benefited fewer than ten households (violating Section 3.5), gewogs failed to submit required work plans (Section 7.2) and periodic progress/completion reports (Section 3.5), and proper inventory maintenance and asset upkeep, mandated by Sections 10.2 and 10.1 were neglected by many gewog administrations.
The PDF might compromise free and fair elections
Article 24.1 of the constitution ensures free and fair elections for parliament and local government. To uphold this principle, it is essential to avoid any perception of undue advantage. According to the review report, “the PDF, while aimed at development, might inadvertently give sitting MPs an edge due to financial influence.” Article 24 also mandates state financing of elections and sets expenditure limits to maintain fairness. “Thus, ensuring that public funds are not perceived as providing an electoral advantage is crucial to maintaining the integrity of our democratic process.”
Resource-based Budgeting
The review report spelt out that resuming the PDF is not appropriate as local governments are already empowered and funded to implement prioritized activities adequately. “Local governments already receive sufficient financial resources through block grants based on the Resource Allocation Formula (RAF), as outlined in Section 18(c) of the constitution”.
The review was also based on the AGG 2024 for LGs.Government Pledges are streamlined in the FYP
Recalling the first session of the Fourth Parliament when MPs expressed concerns about the lack of a dedicated budget to address urgent public needs and fulfill pledges made during campaigns, the report stated that government pledges are effectively integrated into the Five Year Plan (FYP) and are addressed within the plan’s timeframe. Additionally, LGs receive annual block grants and possess financial authority to manage developmental activities and emergency expenditures within their communities. “Therefore, a PDF may not be required, as current systems adequately address pledges and support communities during emergencies,” the review read.
Based on these justifications, the Finance Ministry recommended that the allocation of a separate budget as PDF is not favourable.
It said that the creation of a separate PDF is not in line with the existing laws, which are designed to ensure the transparent and equitable distribution of resources across LGs. “Any deviation from the established budget allocation process could undermine the legal framework, leading to administrative challenges and potential inefficiencies.”
From an economic perspective, the report said that segregating a portion of the budget into a PDF could lead to suboptimal resource allocation. “The existing budget framework is crafted to distribute resources based on a comprehensive assessment of national and local priorities. Diverting funds into separate PDF could compromise essential services and critical infrastructure projects, exacerbating budget deficits and placing additional strain on public finances,” the report said.
Amongst others, the review report also pointed out that introducing another layer of funding could create confusion, overlaps, and administrative burdens, reducing the overall efficiency of budget implementations. Moreover, the introduction of a PDF could compromise relationships between the electorate and the elected by bypassing legislative oversight, weakening the legislature’s role in scrutinizing budget allocations and ensuring funds are used properly.
The proposal to reintroduce the CDG was submitted by the internal committee of the parliament during the 1st Session of the Fourth Parliament.
The CDG was established and initiated by the first democratically elected government from the financial year 2009-10, allocating Nu 2M per annum per constituency. It was subjected to a lot of discussions and debates both inside and outside the parliament. After much disagreement from the National Council (NC), the Opposition calling it unconstitutional and even the Election Commission of Bhutan (ECB) disapproving it, the government finally decided to do away with the CDG.
During the tenure of the second government, the Gewog Development Grant (GDG) was established to strengthen decentralization. It was an extension of the CDG initiated by the first government with an allocation of Nu 2M per annum per gewog. Later in 2016, to further strengthen and deepen the decentralization process, the government introduced the Dzongkhag Development Grant (DDG) with an additional allocation of Nu 7M per dzongkhag per annum.
The DDG was revised to Nu 10M in 2019 to support priority activities not included in the plan. During the 10th Session of the Lhengye Zhungtshog (LZ), a Nu 2M per gewog per annum Annual Grants for Gewogs (AGG) was established replacing the GDG. The Annual Grant Guidelines came into effect respectively in July 2020 for the LG.
Renamed as a Priority Development Fund (PDF), the NA on July 1, 2024 endorsed a motion proposing to resume the CDG. In response to the motion, the Finance Minister reported that MoF will review the recommendations and report to the house.
By Tashi Namgyal from Thimphu
