Govt boosting distribution‚ not growth

KUVERA CHALISE

KATHMANDU: The UCPN-Maoist government, with its populist fiscal policy, is encouraging distribution and consumption, not growth, according to former finance minister Ram Sharan Mahat.

"The trend of consumption-oriented budget floated by the UCPN-Maoist has to be changed into capital spending-oriented budget," said Mahat, adding that the more the government directs its spending on development works, the more it will boost the growth by creating employment in the country. But the government has failed to spend capital budget — popularly known as development expenses — as of mid-June (in 11 months of this fiscal). It has been able to spend only Rs 31.76 billion on cash basis, which is less than half of the earmarked development spending (Rs 72.61 billion) under the capital budget.

"Without spending of capital budget, the economy cannot not grow," said Mahat, adding that the government's capacity to spend has eroded due to its weak political and administrative capability.

Development expenses not only create employment at the local level but also boost the confidence of the private sector, encouraging it to invest in the country, said economist Chiranjivi Nepal. The private sector's spending will be four times the government spending. "The government's contribution in total investment is only 21 per cent. If it had been able to spend its total capital budget, it would have encouraged the private sector — the engine of growth," he said, adding that the low government spending will result in lower private sector's spending, hurting the industrialisation of the country that creates more employment.

The country needs to create some 420,000 jobs every year but with low development spending, neither the government nor the private sector has been able to create jobs, driving Nepali youth overseas, Nepal added. By the end of the 11th month of the current fiscal year, some 480,990 Nepalis have left the country in search of jobs due to government's inability to create employment.

However, the government's increased regular expenses and low development expenses coupled with financial indiscipline have bled the government coffers. The government has earmarked Rs 266.61 billion under the regular administrative spending, which is more than the government's income source — the revenue mobilisation that is targeted at Rs 242 billion.

"The government, due to consumption-led expansionary budget, could not even pay salary of the employees from its internal resources," he said, adding that it is making country more dependent on foreign aid to even pay the regular salary for the government employees.