Nepal’s liberal political and economic order faced a jolt when finance minister Bharat Mohan Adhikari presented the new fiscal year's budget by curtailing the role of the private sector in the country’s economic development. He increased the salary and benefits of employees. The announcement reduced the gap in earnings between high level civil servants and those in the lower strata. Past experiences have shown that state intervention in the market cannot work. But a general consensus among the ruling communist parties to pursue a ‘three-pillar economic policy’ of promoting the private sector, cooperatives and the government's role in national development is starting to cause distress among businesses.


It seems that in the name of promoting cooperatives, the finance minister was announcing the death of the market economy and liberalism. This may affect the future investment environment in the country. The budget of 2011 has re-opened the debate in a fiercer manner as it outlined the need of promoting the role of state, cooperatives and private sector in the major objectives of the budget.


Dominated by communists, the present government has adopted a new policy that has sent shockwaves to the private sector already used to the open market economy followed actively by the country since the
political changes of 1990s.


One of the positive aspects in the budget process is that the country’s political parties had  some common points to stand together for. Despite political differences and divisions, the country’s major political parties showed their seriousness about the economic issues by allowing the finance minister to present the full budget.  Nepal has been passing through an economic crisis and any obstruction in presenting the annual budget would have created a worse situation.


Realizing the importance of the annual budget in the national economy, all the political parties allowed the annual budget to enter its regular process, except for some minor glitches. This will help sustain the country’s economy. Although we cannot agree on the nature of budget that undermines market forces, what we welcome at the moment is that the country has a budget plan to go by for the new fiscal year.


Keshab Poudel
Editor