Kathmandu, May 8

Private sector has said that the next fiscal budget should focus on increasing investment in the infrastructure to bridge the yawning infrastructure gap, raise the competitiveness of production sector and attract investment in the country.

As the country has envisioned to move towards the higher growth trajectory, the country should have strong production base for the reliable, sustainable and inclusive economic growth, according to Hari Bhakta Sharma, president of the Confederation of Nepalese Industries (CNI).

Speaking during the ‘Pre-Budget Interaction Programme’ organised by the Nepal Rastra Bank (NRB) — the central regulatory and monetary authority — Sharma said that the fiscal budget needs to try to address some structural problems of the economy, like widening trade deficit, low employment generation and high cost of production.

Participants of the interaction programme representing various private sector organisations expressed concerns about lack of required facilities to boost production in the country like robust infrastructure, subsidised interest rate for the productive sector to incentivise cost of production, among others.

The participants also flagged government’s slow capital expenditure as the banks have faced severe credit crunch this year due to retarded spending in development works. The government’s treasury surplus has ballooned to Rs 254 billion, while at the same time banks are running out of funds to issue loans, according to Anil Keshary Shah, president of Nepal Bankers’ Association.

Anal Raj Bhattarai, a former banker, proposed for the funds to be mobilised through the financial system if the government has treasury surplus of above 10 per cent of the budget to prevent such acute credit crunch.

Kamalesh Kumar Agrawal, general secretary of the Nepal Chamber of Commerce (NCC), opined that there should not be a system of double taxation in the federal system. Citing an example of Goods and Services Tax (GST), which is scheduled to be implemented in India from July 1 as the centralised tax system, Agrawal opined that all the major taxes should be collected from the centre and shared properly between provinces and local units instead of collecting similar types of taxes from various levels.

Speaking in the programme, Heem Bahadur Rawal, president of the Nepal Foreign Trade Association, said that the Department of Customs has brought the Import-Export (IE) code into implementation from next fiscal, but that to obtain the IE code, a trader should not be penalised from the tax office, which is a stringent provision. As per Rawal, the provision should be eased so that a trader would be able to obtain the IE code by presenting just the tax clearance certificate. He also highlighted the hassles in claiming insurance of damage goods in import, which needs to be facilitated on the basis of proven documents. He also urged for some policy measures to address the payment system called documents against acceptance (D/A system payment). “The third seller asks for payment within 30 days in such a payment system but the government allows sending payment only after receiving the goods, which takes longer,” he said.

Nepal Remitters Association also asked for subsidy in service charge to lower the cost of sending remittances. President of Nepal Poultry Federation Guna Chandra Bista said that country has become self-reliant in poultry since last few years, however, the new investment is required in the sector to keep up with the demand, which has been rising at the rate of 18 to 20 per cent per annum. “The government should bring incentive packages to attract investment in the poultry sector,” he said.

Moti Lal Dugar, chairman of MV Dugar Group, said that the frequent interest rate hike by the banks has been adversely affecting the feasibility of hydropower projects, which have fixed income. “The hydro projects would not be able to sustain with interest rates of more than nine per cent, and thus, there should be fixed interest rate for such projects.”

During the interaction, NRB Governor Chiranjibi Nepal said economic growth has gathered momentum in this fiscal after low base of the last two consecutive fiscal years and the central bank is looking forward to ramping up investment from both public and private sectors for the development of infrastructure and production sectors for sustainable economic growth. The NRB, as an economic adviser to the government, will forward the suggestions collected from the private sector to the government, he assured.