Nepal | July 11, 2020

Budget size reduced by 3.8pc to Rs 1.47 trillion

Sujan Dhungana
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  • Due priority given to health, employment generation and relief for crisis-hit businesses
  • Khatiwada sets 7pc growth target for next fiscal

Kathmandu, May 28

Amid uncertainties due to the spread of COVID-19 in the country, Finance Minister Yubaraj Khatiwada today unveiled a federal budget of Rs 1.475 trillion for fiscal 2020-21 at the joint session of the House of Representatives and National Assembly. It has fundamentally prioritised combating the spread of coronavirus and providing relief to the crisis-hit economy.

Of the total budget for 2020-21, the government aims to utilise Rs 948.94 billion as recurrent expenditure and Rs 352.91 billion for capital expenditure. It has earmarked Rs 172.79 billion for financing provision. While recurrent and capital expenditure for the next fiscal has been reduced by 0.9 per cent and 13.6 per cent, respectively, compared to the current year’s target, there has been 2.9 per cent increase in financing provision for the next fiscal.

The budget has set a revenue collection target of Rs 889.62 billion for the federal government for the next fiscal. It plans to seek foreign grants and loans worth Rs 60.52 billion and Rs 299.5 billion, respectively through internal borrowing (domestic loan) worth Rs 225 billion is expected to balance the expenditure and source for the budget.

The budget has earmarked Rs 55.19 billion for the seven provinces and Rs 90.05 billion for local bodies in equalisation grants for the next fiscal as against Rs 55.3 billion and Rs 89.95 billion in equalisation grants for provinces and local bodies for the current fiscal.

It has also allocated conditional grant of Rs 36.35 billion and Rs 161.8 billion for the provinces and local bodies, respectively, for the next fiscal, compared to Rs 44.55 billion and Rs 123.87 billion conditional grants for provinces and local levels in the current fiscal.

Under pressure to manage resources, the government has scrapped most of the allowances being provided to civil servants for the next year and cut down unnecessary public expenses. The size of the fund for Constituency Infrastructure Special Programme has also been reduced. However, Khatiwada is optimistic that the COVID crisis will end soon and businesses will restart. He has set seven per cent economic growth target for the next fiscal.

While due priority has been given to the health sector as a result of the pandemic with allocation of Rs 90.69 billion, the budget has also introduced numerous relief packages for businesses affected by the crisis — ranging from subsidised loan facility to tax exemptions.

The government has announced Rs 100 billion refinancing facility for small and medium scale enterprises, tourism and the agriculture sector at five per cent interest rate. A fund of Rs 50 billion will be set up to provide loans at five per cent interest to enterprises in different sectors that have been hit hard by the COVID-19 crisis and are facing difficulty in sustaining workers.

Khatiwada also announced 20 per cent discount on income tax to tourism entrepreneurs, 75 per cent income tax waiver to SMEs with annual transactions of up to Rs 2 million, 50 per cent discount on income tax to enterprises with transactions up to Rs 5 million and 25 per cent income tax waiver for enterprises with annual transactions up to Rs 10 million. To ensure that businesses affected by the contagion get subsidised loans from banks, Khatiwada has mandated each branch of commercial and development banks to provide such loans. While a branch of a commercial bank should provide such loans to at least 10 people, a branch of a development bank should provide this loan facility to at least five people.

While the finance minister announced concessional loans at five per cent, 50 per cent subsidy has also been announced on premium of insurance of concessional loans and the budget has allocated Rs 13.96 billion for the purpose.

The budget aims to expand the Prime Minister Employment Programme and make it a major source of job creation for the unemployed and migrant workers who have returned due to the pandemic. The government plans to create job opportunities for additional two lakh people through PMEP in the next fiscal. The budget aims to promote agriculture sector as a major attraction for new job-seekers through ‘one local level, one agriculture product’ programme. To ensure that farmers have access to credit from banks and financial institutions, the concept of farmers’ credit card will be introduced. A total of Rs 41.4 billion has been allocated for the agriculture sector.

While tourism-related services will get tax exemption, private and government employees have been encouraged to visit domestic destinations to promote local tourism next year.

The finance minister announced 50 per cent waiver on electricity demand charge for industries in the lockdown period, free electricity for small consumers consuming less than 10 units per month, 25 per cent discount on tariff for those consuming 150 units a month and 15 per cent discount to consumers consuming up to 250 units of electricity a month.

On the infrastructure front, due priority has been given to airports, roads, bridges and health infrastructure — Rs 10.91 billion has been set aside for construction of bridges, Rs 19.42 billion for construction and completion of international airports and Rs 8.93 billion for Kathmandu-Tarai Fast Track.

Former finance minister and Nepali Congress leader Ram Sharan Mahat said the government had tried incorporating NC’s suggestions and recommendations in the budget. “In general, the budget is not pessimistic. However, its implementation is tough given the state of governance in Nepal,” he added.

Former finance secretary Rameshwor Khanal said the budget had addressed ‘almost’ all concerns caused by the COVID-19 crisis. “It focuses on health, revival of the economy and job creation which are necessary. Concrete relief packages have also been announced for businesses affected by the pandemic, though the government’s programmes and policies had missed that,” he said.

The budget for the next fiscal is 3.8 per cent less in size compared to the budget for the current fiscal of Rs 1.532 trillion as different austerity measures have been adopted in public expenses amid resource constraints. While budget allocation for physical infrastructure has been reduced, allocations have been significantly increased in health, education and agriculture sectors.

A version of this article appears in e-paper on May 29, 2020, of The Himalayan Times.

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