Budget Of The Federal Government

It is also difficult to find anything solid in the budget, which could at least lay in the first year the much needed foundation for doubling agricultural output in 5 five years. Funds have been allocated under different heads to subsidize agriculture as in the past but the bitter reality is that the money set aside mostly remained unspent, with the exception of subsidy on chemical fertilizers and insurance.Further,it is difficult to believe that announcing support prices of crops like paddy,wheat,sugarcane,etc would help increase production and productivity when people are aware of the bitter reality that the country lacks a financially and technically sound institution to carry out primary procurement of farm output.

June 15, 2018, 2:07 p.m.

More than seven months after the two left parties (UML and Maoist Centre) announced electoral alliance, the two leaders(Oli and Prachanda) finally decided to dissolve their respective parties and form a unified party called the Nepal Communist Party(NCP) on May 17.The NCP was registered with the Election Commission on the same day. The party with two co-chairpersons did not waste much time in announcing the formation of secretariat, standing committee and a huge 441-member central committee. The merger decision, which came after several rounds of intense formal and informal meetings between leaders of the two sides, surprised many watchers because differences between the two parties were growing and it was difficult to think that it would happen so suddenly. Although the unification took seven months from the date of announcement of electoral alliance, one is tempted to believe that it was sooner than expected because unfolding events\differences that surfaced over time were really disturbing, which many thought could ruin unification. It would have been nonsensical for the two parties to run the government without unification because the political stability that Nepalis were longing for would not be possible. People did not want a government of the left alliance without unity and the major opposition party Nepali Congress (NC) would try its best to break the alliance of the two parties, in the event of their failure to unite, without being accused of encouraging political instability in the country. Since the mandate given was that they should unite and rule, the left parties would have lost moral authority to govern without genuine unity. The duo (Oli and Prachanda) should also be congratulated that they have succeeded in roping into the government Upendra Yadav-led Socialist Forum, taking the strength of the government in the Parliament to more than two-thirds, enough to amend the constitution. Constitution will definitely be amended but which particular articles will be chosen for amendment is difficult to say at this point of time. With the CPN solidifying its position this way, NC president Deuba, desperately in need of showing some praise-worthy act to silence his ever increasing critics in the party, will have to wait for some more time to mount a meaningful attack on the government. Indeed, the government has plenty of time to concentrate on nation building. Let us now delve a bit into the budget for the next fiscal year and other allied documents made public by the left alliance\government, which highlighted their stated intentions and ways to stir the economy. It would also be interesting to see how the first budget, accused of being ambitious by some, of the federal government intends to fulfill different promises made in the joint election manifesto of the left alliance and intends to proceed taking as guidelines government’s policies and programmes read in the federal parliament on May 21 by President Bidhya Devi Bhandari.

If we compare the total outlay of this budget for the next fiscal year (Rs.1315 billion) with the estimates of the current one (Rs.1278 billion), it would be difficult to term this budget ambitious. Wishing to have a growth of 8 percent spending Rs.314 billion set aside under the capital expenditure head is also not unrealistic because the budget for this fiscal year had apportioned Rs.335 billion, slashed by the left government to Rs.234billion, to attain a growth of around 7 percent. The growth target is not unachievable provided the private sector’s participation in overall economic activities is achieved. Revenue collection target of Rs.831 billion is also achievable because taxpayers of Nepal have cooperated very well with different governments to help them exceed the target each year. Although it appears little bit unrealistic when looked from the standpoint of revised figures for foreign loans (RS.74.92billion) for the running year, there is no harm in wishing finance minister Khatiwada success in bagging Rs.253billion as loan from outside next fiscal year. Confining our discussion only to a few areas, let us now see how the three documents (election manifesto of the left alliance, policies and programmes of Nepal government and the annual budget) have made declaration\promises for some sectors of our economy.

Promising to increase our per capita income to 5000 dollars in 10 years, the election manifesto promised to make Nepal self-sufficient in basic food items, fish, meat eggs and milk in 2 years and enable the country to export food grains in 5 years. It goes on to state that our agriculture will be organic and Nepal will be declared an organic country in 10 years, free of chemical fertilizer and insecticides. Policies and programmes of Nepal government states that a large part of some two-thirds of our population currently dependent on agriculture will be mobilized in non-farm sector. It mentions that agricultural output will be doubled in 5 years through increase in productivity. It also talks about encouraging organic farming in Nepal. Interesting would be to remember Prime Minister Oli’s New Year 2075 speech made sitting on the bank of beautiful Rara Lake, which stated among others that the population engaged in agriculture, will be reduced to 25 percent of what it is now. Budget for the coming fiscal year states that agricultural output will be doubled in 5 years but does not say anything about declaring Nepal an organic state. Contrary to what Oli said from Rara and what is stated in the policies and programmes document, Khatiwada claims in the budget that agriculture will be developed as a basis for ending unemployment, probably hinting that our agriculture will have to absorb more people from non-farm sector. People would be happy to know from the concerned whether agriculture is going to be the recipient of people from other sectors as indicated by the budget or it will have to send excess people from it to other sectors as desired by Oli and stated in the policies and programmes document. It is also difficult to find anything solid in the budget, which could at least lay in the first year the much needed foundation for doubling agricultural output in 5 five years. Funds have been allocated under different heads to subsidize agriculture as in the past but the bitter reality is that the money set aside mostly remained unspent, with the exception of subsidy on chemical fertilizers and insurance.Further,it is difficult to believe that announcing support prices of crops like paddy,wheat,sugarcane,etc would help increase production and productivity when people are aware of the bitter reality that the country lacks a financially and technically sound institution to carry out primary procurement of farm output. Thus it is difficult to differ with people who find the target of doubling farm production in 5 years little bit ambitious. The federal budget has also highlighted the importance of tourism in our economy and has fixed a target of getting into the country 2 million tourists by the year 2020, which definitely looks an ambitious target if we take into consideration the state of existing facilities\infrastructures. The only international airport in the country (Tribhuvan International Airport) is so congested that flights are kept on hold in the sky, sometimes for more than an hour, before they are given permission to land. The need is to expedite construction of the much talked about international airport at Nijgad but unfortunately the federal government has not given the required level of importance to it and the amount apportioned is likely to remain unspent. In addition to accelerating construction of this airport, Nepal government should leave no stone unturned to get permission from India for some more air entry points and should stop prioritizing construction of a domestic airport in Kavre district to ease, as said in the budget, traffic congestion at Kathmandu airport. Conditions\facilities, including the horrible conditions of our roads, remaining constant, it would be difficult to have 2 million tourists by 2020, which is also expected to give Nepal Rs. 155 billion. Number of tourists expected in in the next fiscal year is 1.2 million and the income is estimated at Rs.114 billion. Another confusion pertains to the ability of the economy in generating enough employment opportunities in the country so that Nepalis do not have to leave the country for semi-skilled and non-skilled job outside. If the idea is to get maximum number of people off agriculture to be employed elsewhere, non-farm sector will have to grow very fast. Disappointing, however, is the fact that the contribution of industrial output to our total GDP has gone down by 50 percent in the last decade. Hope loan provisions made in the budget and Rs.310 billion set aside for additional employment generation does enough to provide gainful employment within the country to every job- seeking Nepali.

One major disheartening fact for the government has been that all the seven provinces, six ruled by the CPN, have been critical of the budget, accusing it of lacking federal character and not doing enough for them in terms of distribution of resources. Likewise, industrialists and traders have voiced their concerns through their respective bodies about failure of the government to create a very much expected investment friendly environment in the country. No one feels like blaming them when they argue that the government should have relied more on expanding tax coverage rather than rate hikes to collect more revenue. Stock brokers went beyond words to resist the new directive of the government which required investors to pay capital gains tax on the sale of rights and bonus shares on the basis of the market value of the company’s shares. Investors did not post any purchase or sale order for more than a day, which resulted in losses worth millions of rupees in revenue to the government. It is good that the government has decided to put on hold its decision to revise the capital gains tax threshold on the sale of bonus and right shares. Indeed, government should be prepared to introduce many changes in the budget if the idea is to facilitate inflow of external funds and make productive use of it as well as internal funds to attain an encouraging level of growth in the country. Growth definitely generates some level of inequality, which can be corrected using progressive tools but heavy reliance on these measures in a stagnating economy could be highly counterproductive. Growth brings along inequality, which communist China is also experiencing. It may be remembered that the wealth created there is being used to bridge the urban-rural gap and to alleviate poverty. Lessons could also be learnt from the actions of US president Trump who is furiously raising trade issues to correct the American trade imbalance with major economies of the world, most often at the cost of offending his close allies as it happened at the recent G-7 meeting in Quebec, Canada. The duo (Oli and Khatiwada) should not be less concerned and serious than Trump because our trade deficit has reached Rs. 919 billion in 10 months. Prime Minister Oli may also kindly note that it will not be difficult for him to rule the country for some years because the major opposition party NC appears irrecoverably stuck in a mess but the kind of prosperity that he has been talking of since long cannot be effected through this kind of budget. May Lord Pashupatinath continue to protect us and give all of us wisdom without any discrimination?

Dr. Tilak Rawal

Dr. Tilak Rawal

Dr. Rawal is former governor of NRB.

About Us And Others
Sep 22, 2018
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Powerful Government Confronted
Jul 21, 2018
Politics And Our Economy
May 03, 2018
Oli Visits India
Apr 06, 2018

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