Budget 2014/15: Bad And Good

The Rs. 618 billion budget, has been welcomed by the two big business actors, Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Confederation of Nepalese Industries (CNI), mentioning it to be pro-private with the government largely

Aug. 17, 2014, 5:45 p.m. Published in Magazine Issue: Vol: 08 No. -5 August. 15- 2014 (Sharawan 30, 2071

Aimed at revitalizing the economy, the budget presented for 2014-2015 has set a substantial stage in the democratic politics of Nepal. With the never ending debates, calls and demands to make the budget reform-oriented, numerous allegations, criticisms and controversies, however, have come up surrounding the budget from less than an hour after it was made public. While some argued that the budget plan failed to address the efficiency of the resource allocation, the others applauded the finance minister for doing a good homework.

The Rs. 618 billion budget, has been welcomed by the two big business actors, Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Confederation of Nepalese Industries (CNI), mentioning it to be pro-private with the government largely addressing the demands of the private sector. Among the many initiatives incorporated in the budget, the provisions to end power crisis in three years, build special economic zones, develop infrastructure essential for the industrial sector and launch measures against syndicate systems, tax, have been commended by the private sector. But the implementation of the provisions hugely relies on the amendments of over a dozen of Acts. However, no such discussions have been currently in the priorities of the parliament.

Specifically, at a time when the implementation of Kathmandu-Tarai Fast Track requires a financial push, the budget for the road sector as a priority is positive.  The government has sought to commence the construction in the next fiscal year and, in this regard, has promised to prepare a detailed project report in six months. The budget has wittily addressed the demands of the Constituent Assembly members through authorizing them to expend Rs. 10 million, as against the Rs. 50 million they had demanded for the operation of infrastructure related projects in their constituencies, quelling the public anger on such funds being misused in the past. However, the assurance to channelize Rs. 50 million to each constituency in the form of various programmes have kept the lawmakers pleased, thereby not hurting the current coalition government’s all-party viewpoint. 

On the downside, economists have questioned the viability of achieving a 6% economic growth maintaining the inflation at 8%, as aimed by the budget.  They argue that there have not been any concrete programs to increase industrial production in materializing the targeted economic growth. The budget, no doubt, is positive for developing the energy infrastructure, but efforts spelled out to propel economic development are not concrete. The focus should have rather been on implementing what has been presented. The government has just continued the past system. The prime focus should have been placed on addressing deep-rooted problems of the economy namely job creation, increasing trade deficit, declining productivity and rising inflation.

Nepal’s aim of graduating from the league of least developed countries remains impractical when the proposed budget is hugely loan financed and there is no clarity on how to mobilize the internal sources of revenue.

At a time when the real estate sector, the foundation of area development had pinned hopes on the budget, the budget has done less homework in catering to this sector of the economy. In the budget of previous year, there had been an arrangement for making a work policy allowing foreign nationals to purchase the units of apartment buildings and flats. Hence the budget has remained silent about formulation and implementation of such provisions.

Despite, allocating the highest budget in education sector, the proposed budget is not adequate to bring in reforms in the sector. In a study by the World Bank in 2005, it was revealed that the government required Rs. 2 billion for redeployment of schoolteachers. Additionally, the government would face the extra financial burden for remunerating the schoolteachers after completing the ´School Sector Reform Program´ (SSRP). Educationalists have criticized the budget in the fiscal year for not having a vision to address this concern and having nothing new towards increasing students’ access to quality education.

Another shortcoming of the budget is inadequate allocation for the Nepal Oil Corporation (NOC) price stabilization fund. NOC’s loss is extremely high and this could obstruct the process of achieving the desired economic growth and inflation target.

Although big announcement to end power cut within three years and timely completion of the Melamchi Drinking Water project have been included in the budget, implementation is a key to translate these incorporations.

Implementation has always been poor in the country.  Weak implementation has been a customary economic problem and giving a continuity to it the ministries, commissions, secretariats and other bodies concerned have just submitted a dozen projects to the National Planning Commission (NPC) 24 days after receiving rights for spending.

Development work looks to be impacted like in the previous fiscal years as the concerned bodies have already delayed the approval of the targeted projects and programs for the current year. This has an adverse impact on projects/programs that need to invite bids for fresh contracts. 

On the contrary, through a move like development of revenue management computer software for better administration of revenue, the custom of spending the budget in the eleventh hour could be least expected. Steps like these could support the budget makers who have been amidst a huge criticism from various interest groups to prove that the budget 2014/15 is unlike the previous budgets termed as ‘old wine in a new bottle’ primarily through policy reforms, acts amendments and implementation.

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