HIMALAYAN NEWS SERVICE
KATHMANDU: The experts have taken exception to government giving precedence to co-operative sidelining the role of private sector in the annual budget for the fiscal year 2011-12.
“The co-operative could have been a good vehicle to promote agriculture marketing and rural credit but giving unnatural importance on them can only promote distortion,” said former finance minister Dr Ram Sharan Mahat in a post budget interaction programme organised by Society of Economic Journalists-Nepal (Sejon) here today.
He blamed the budget for being unable to address the crux of the economic troubles that has stemmed by lack of proper governance.
“Private sector has lost the confidence in the government’s ability to ensure security of their investment which is causing capital flight,” he said, adding that there is a slim chance of attaining the targeted growth rate of five per cent at the present situation of agriculture and manufacturing sector.
The budget could also not sustain, he added.
Moreover, he dubbed the budget to be too big to bring macro stability with Rs 266 earmarked for recurrent expenditure that will only invite inflationary pressure so public can expect inflation to cross 14 per cent — double the government’s target.
“The budget document has mentioned 134 infrastructure projects but besides handful most of them are small projects.
Even for those there is not much budget allocated,” he informed, expressing that the budget has been practically reduced to party’ propaganda pamphlet’ without any concrete programme. “Its only speech but there is no budget.”
“The private sector has to be concerned about government giving importance to co-operative,” said senior economist Prof Dr Bishamber Pyakurel.
“Co-operative should not
be expected to drive the economy as it is effective only to
provide roll-over funds for
the low income group to generate employment opportunities,” he added. Dr Pyakurel, who is also board member of the central bank, opposed the government’s decision to give the central bank the responsibility to regulate cooperatives as it has limited capacity.
“At a time, when central bank’s regulatory capacity is under scanner due to its failure of regulating and supervising around 300 banks and financial institutions, how can it regulate some 13,000 more cooperatives,” he asked.
Pyakurel also proposed to outsource the supervising agency to make it more professional and effective.
Another economist Dr Dilli Raj Khanal defended the budget saying that in the country with a large number of downtrodden population like Nepal, the annual budget has to balance the trade-off between providing equality and growth, that is why, the budget appear to be distributive to some.
“The budget giving utmost importance to co-operative will substantiate the message that depositing funds at cooperatives are safer than in banks and financial institutions,” CEO of Lumbini Bank Shovan Dev Pant, said, adding that it could lead to disaster.
Vice president of Confederation of Nepalese Industries (CNI) Hari Bhakta Sharma lamented that budget has no provision to improve competitiveness of manufacturing industries.
“Domestic industries are lacking competitiveness since last some years due to overwhelming power crisis, labour unrest and absence of innovation that has caused flight of entrepreneurs,” he said.
Similarly, president of Nepal Chamber of Commerce Suresh Basnet appreciated budget for effectively addressing liquidity problem by introducing the provision of negative declaration of income source.
“However, by giving precedence to the co-operative, the budget has demeaned the role of private sector that contributes almost 80 per cent of economic activities,” he said, cautioning that the private sector will be further discouraged as co-operative will stand as their competitors.
Central Bank has no fund to refinance
KATHMANDU: Prof Dr Bishwambher Pyakurel said that there are 17 more financial institutions seeking special refinancing from the central bank. “The central bank has already refinanced Rs 4.37 billion to financial institutions,” he said, adding that the central bank has now left with only Rs 0.63 billion from its total of Rs 5 billion fund. He also informed that the total deposits with the class A, B and C financial institutions — commercial banks, development banks and finance companies — stands at Rs 882.68 billion, whereas their lending stands at Rs 692.10 billion. Some Rs 100 billion is with cooperatives and Rs 300 billion is out of the banking channel, he said, adding that unstable policy has dried up the money from the formal channel to the semi-and infornmal sectors.