Budget 2007-08: Socialist concoction from Mahat
Kathmandu, July 12:
Continuing with last year’s trend, finance minister Dr Ram Sharan Mahat today unveiled a ‘socialist budget’ with a total outlay of over Rs 168.99 billion for the fiscal year 2007-08, in the interim parliament.
The budgetary allocations are scattered and seem to be more unrealistic in the course of being rural-oriented and social.
Dr Mahat has allocated funds in a piecemeal basis, focusing especially on hardcore social sectors such as education, health, children and women, and has lost focus in the an attempt to please all.
Although the annual estimate of income and expenditure has gone up by 28.2 per cent against the current fiscal year’s revised outlay, it carries a gross deficit of Rs 24.56 billion.
The last fiscal year’s gross budget deficit was at Rs 22.45 billion.
Out of the total estimated expenditure, Dr Mahat has earmarked Rs 98.17 billion under the recurrent heading, an increment by 22.2 per cent of the revised estimate, while Rs 55.26 billion has been allotted for the capital expenditure, up by 51.9 per cent against the last fiscal’s revised estimate. And, Rs 15.56 billion has been set aside for repayment of principal.
To meet the above-mentioned expenditures, the government has set a target of generating as much as of Rs 99.60 billion of revenue from existing sources, while Rs 27.46 billion and Rs 17.36 billion are expected to finance through foreign grant and loans, respectively.
The budget has expected to generate an additional Rs 4.06 billion through changes in revenue rates, administrative reforms and the revenue policy reforms. This will lower the net budget deficit to Rs 20.50 billion, which Dr Mahat said would be met through domestic borrowings.
With no major changes in tax rates and induction of new steps, mobilisation of a total of Rs 103.6 billion revenue seems to be a daunting task for the government.
“This projection is made based on the current growth trend of revenue generation, which is in an average of 19.5 per cent,” Dr Mahat said, adding that about 17 per cent growth would meet the targets.
The government plans to maintain the annual inflation rate at around five per cent during the fiscal year 2007-08, while it projects that the GDP will grow by five per cent.
Among the major sectors, education is the largest absorber of the budget and total outlay for the sector stands at Rs 28.39 billion.
Although the total allocation has increased by Rs 5.38 billion against the actual allocation of 2006-07, Rs 25.74 billion has been set aside for recurrent expenditure, mainly for salary and pension for teachers and civil servants.
The budget plans to recruit an additional 12,000 school teachers and plans to handover 2,500 public schools to the community. Under the development plan for the sector, the government plans to build 6,500 additional classrooms and 1,500 toilets, particularly for girl students.
The second largest budget-absorbing sector is health and the total allocation accounts for Rs 12.18 billion. Even though the government has not set any concrete development plans for health sector, the budget states that the ongoing plans and programmes will be continued.
The budget plans to extend the Integrated Child Disease Management Programme in 16 more districts making a total 64 districts to reduce infant mortality rate.
Ten million vitamin tablets and 80 million iron tablets will be distributed. School vaccines programme will be implemented in 44 districts as well as administering polio drops programme will be continued.
Contrary to the government’s much-touted plan for the budget to focus on infrastructure development, reconstruction and rehabilitation, the budget has allotted Rs 9.34 billion for road construction and expansion. Under road construction, the government has allotted budget for only the improvement of network and upgrading existing feeder roads.
The budget has reiterated that the plan for connecting all district headquarters with road network will be completed within three years, while five district headquarters of Shankhuwasabha, Bhojpur, Khotang, Solukhumbhu and Mustang will be connected within the coming fiscal year.
The new project under the road development that the budget is undertaking include a mid-hill highway connecting Chyangthapu of Pancthar and Jhulaghat of Baitadi district will commence this year and expected to complete in five years.
Budget for building 30 new bridges has been also allotted.
Dr Mahat has allotted Rs 7.65 billion for the hydropower sector and plans to execute an ambitious plan for generating additional 5,000MW hydroelectricity in next 10 years.
Rural electrification, small and medium hydropower development programmes are in priority, while arrangements are to be made to discourage holding license for long time and not initiating the trade even after receiving the license to produce hydro electricity projects.
The agriculture sector, which used to be one of the largest budget absorbers, has not been treated fairly, although the total allocation has been raised by 47.3 per cent to Rs 5.82 billion.
For the private sector, the budget has stated to guarantee industrial and investment security, reform in legal and organisation structure for creation of investment climate, procedural simplification, additional provision for sick industry rehabilitation and opportunities for foreign, non-resident Nepali and private sector investment. It has also envisioned to create a separate Industrial Security Force.
Formulation of law for special economic zone, export processing zones, tourism and recreational spots and special commercial areas is another good news for the private sector. It has also stated to form an Investment Board with full authority for industrial investment promotion.
A separate national label for Nepali carpet and pashmina is expected to boost the credibility of Nepali exports of these two leading export items. Incentives on exports and import of raw materials are some good news, especially for the exporters.
For the tourism sector, the budget proposes to formulate a new Tourism Policy incorporating the long term vision and broad-based reform agenda of the tourism sector.
A special tourism promotion programme ‘Send Home a Friend’ will be launched this year. The budget proposes to start a process for building a second international airport at Nijgarh of Bara district.