Preventing economic catastrophe No alternative to ordinance budget

DILLI RAJ KHANAL

Despite the deadline of releasing the ordinance budget coming very close, strong opposition mainly by the two major political parties is continuing. Retrospectively, during the four years of the Constituency Assembly (CA), the budget was misused as a ploy to continue or topple down the governments ignoring the role of the CA. Today, more forceful moves are underway to prevent the caretaker government from bringing out the ordinance budget by ignoring the broader ramifications of a budget-less state.

The broad picture of the economy reveals that there are some positive symptoms in different fronts unlike the very bleak situation prevailing say two years back. There is historically record surplus in the balance of payments added by huge surplus in the current account. There are some downward movements in the average prices with some noticeable fall in the prices of the food items. The revenue performance also seems to be satisfactory despite albeit higher target. Although problems in the capital expenditure front are noticeable, some concerted efforts since a few months are there to ensure some pickups in the capital expenditure front. The health of the banking and financial sector is relatively better as rapidly increased deposits indicate. One important positive development is that as a result of various initiatives to facilitate or attract investors after the establishment of the investment board, both domestic and foreign invertors have shown keen interest to invest billions of rupees in Nepal’s energy and other infrastructure sectors. All these indicate possibilities of creating certain momentum in the economy added by massive rise in remittances with very favorable external balance of payments situation. High hope of new constitution coming within the deadline set by the Supreme Court ensuring political stability together with some new policy initiatives and reforms or changes have been instrumental for this. But after the dissolution of CA without bringing a constitution followed by increased confrontation between the ruling and opposition parties have disappointed the Nepalese people, including investors. Opposition to the ordinance budget in a situation of no other alternatives has not only frustrated the private investors with the risk of receding the possibility of committed investment, but it has also angered people of different walk of life who were hoping that the budget apart from some reliefs or facilities would provide new income and employment opportunities. At a time when there is some cushion or space from the standpoint of the economy, the scope of bringing about required reforms or changes in different policy, structural and institutional fronts brightens which could enable to attract more investment in the areas of competitive advantages, enhance employment centric development activities, generate more revenue for allocating augmented resources for the betterment of the downtrodden and common people and ultimately speed up the growth for economic prosperity. Some bold initiatives indeed are prerequisites for correcting many policy mismatches and abolishing anomalies perpetuating since long in the different front of the Nepalese economy. Very high transaction cost added by very poor governance system together with various monopoly practices are posing problems in enhancing competitive strength of the private sector. The policy mismatch or lack of incentive structure is leading to extinction of domestic resource based micro, small and medium enterprises having very high backward linkages with better prospects of strengthening the internal capacity of the economy. The investment channeled through the banking and financial system is predominantly diverted to the unproductive sectors. The upward sticky tendency of lending rate with widening of spread in the interest rate is hurting competitive productive investment environment. The enormous rise in the trade deficit is one of the major areas of concern. Today, 84 to 85 per cent of the total expenses are simply made in the current expenses indicating limited prospects of raising productive capacity of the economy through present budgetary system and its structure. Regional imbalances in the government resource allocation are extremely high. More worryingly, more than 17 to 18 hundred youths who are the backbone of nation building are leaving the country every day. The income inequality has gone up to such a high level that it could be considered as dangerous from the standpoint of political stability and social harmony. Therefore, in a situation of both opportunities and challenges, it is required that the political parties instead of taking extreme positions agree to finalize the budget collectively making it more result oriented and problem solving. The catastrophic near to long term effect of no budget is unthinkable.

It is also urgent that the political parties expedite their debate and discussion to resolve their differences on federalism and other critical issues for creating a condition that facilitates drafting of new constitution as early as possible which could also pave the way for the formation of a national consensus government. The maturity and responsiveness of the different political parties will be known sooner than later.