Though there are positive aspects, what remains to be seen is the implementation of provisions
KATHMANDU, MAY 29
The government has unveiled a budget of Rs 1.751 trillion for the fiscal year 2023-24 in the joint session of the House of Representatives and National Assembly here today.
The size of the federal budget for the next fiscal presented by Finance Minister Prakash Sharan Mahat today is 2.37 per cent smaller than the budget of Rs 1.793 trillion announced for the current fiscal year, 2022-23, which ends in mid-July. The budget for the current fiscal was, however, slashed to Rs 1.549 trillion during the half-yearly budget review in February.
Thus, compared to the revised budget size, the budget for the next fiscal year has been expanded by 16.37 per cent.
According to Finance Minister Mahat, out of the total allocation, Rs 1,141.78 billion or 65 per cent has been allocated for current expenditure, Rs 327 billion or 17.25 per cent for capital expenditure. Similarly, Rs 374.5 billion has been allocated for financial management and Rs 408 billion for grant distribution at provincial and local levels.
Meanwhile, to source its expenses, the government has set the revenue collection target for the next fiscal at Rs 1.248 trillion. It plans to seek foreign grants and loans worth Rs 49.94 billion and Rs 212.75 billion respectively.
Furthermore, the government plans to finance its expenses through domestic loans amounting to Rs 240 billion.
In the budget speech that lasted more than three hours, Finance Minister Mahat informed that the annual economic growth of the country for the next fiscal year has been set at an optimistic six per cent hoping for agradual revival of economic activities.
Also, the government has aimed to limit inflation at 6.5 per cent next fiscal year.
Finance Minister Mahat announced that Rs 58.67 billion has been allocated to the provincial level and Rs 87.35 billion to local levels under the equalisation grant. Similarly, Rs 35.72 billion has been allocated to provinces and Rs 191 billion to local levels under conditional grant, while Rs 6.22 billion has been allocated to provinces and Rs 7.05 billion to local levels for supplementary grant. Under special grant, Rs 4.46 billion has been allocated to the states and Rs 8.73 billion to the local bodies.
The government, in its budget, has decided to prioritise the development of agriculture, energy, and tourism sectors; investment promotion, industrial development, and trade balance; social sector development and social security; development of physical infrastructure; promotion of digital and green economy; human resources development and job creation; financial sector reforms; strengthening financial federalism and improving service delivery.
The government has introduced some positive policies in the budget, but the main focus and priorities of the government still remain unclear. While the government has taken some needed steps to reach its set objectives, the question on their implementation remains, economists say.
"There are two main chronic problems in our economy: Under-spending of our capital budget and perpetual trade deficit. While the finance minister has announced the issue of capital under-spending will be addressed through a decision to incorporate projects that have finished formulating their detailed project report and have cleared the project sites in the upcoming budget, the question of its effective implementa-tion remains.
Also, the finance minister has directed to complete the formulation of guidelines, working procedures, or standard operating procedure of projects by mid-July and to approve the Environment Impact Assessment of a project within 30 days and allow the cutting of trees within 15 days after approval of the Ministry of Forest and Environment. If these specific provisions can be implemented, they will give positive results," said Keshav Acharya, an economist. Other positive steps, according to him, include removal of 20 institutions and merging of others, allocation of one per cent of the capital budget to research and development, the introduction of automatic routes for attracting foreign investment.
"The budget also looks realistic compared to the budget of the current fiscal year. However, it still lacks clarity on its priorities and main objectives.
The government has decided to review development projects over one billion rupees each month.But this will dilute efforts as they will have to go through hundreds of them. It would have been better to review projects over five to 10 billion rupees only for effective implementation.
On the other hand, the government has allowed provinces to handle projects of Rs 2.5 million, which is very low. The local level should have been allowed to handle projects around Rs 500 million while provinces should be given the responsibility of projects over one billion rupees," he opined.
According to Economist Bhim Bhurtel, while the government has announced some new policies and decisions, many of them contradict their own objectives. "On the one hand, the government has decided to revoke projects taking long time to award contracts, and on the other, it is planning to revive the MPs Development Fund 'Samsad Bikash Kosh' and allocate Rs 50 million to a single constituency, which contradicts the government objective of reducing its expenses.
Also, while the government has announced it will promote green economy, it is making preparations to establish a fuel depot in Pokhara," he said.
He further termed the economic growth target set for next fiscal 'unrealistic and unachievable' as the economy is facing multiple challenges. "I also found it amusing that the government is eyeing a fourth-generation industrial revolution when the industrial sector is still in the first-generation phase," he shared.
For the current fiscal year, the government has set a target of eight per cent economic growth, but the National Statistics Office has estimated the growth will be limited to only 2.16 per cent.
Ministry-wise allocation
Ministry of Education, Science and Technology........................................... Rs 197.29bn
Ministry of Physical Infrastructure and Transport......................................... Rs 131.59bn
Ministry of Energy, Water Resources and Irrigation...................................... Rs 87.45bn
Ministry of Health and Population................................................................ Rs 83.99bn
Ministry of Urban Development................................................................... Rs 66.17bn
Ministry of Agriculture and Livestock Development..................................... Rs 58.98bn
Ministry of Water Supply and Sanitation...................................................... Rs 28.16bn
Ministry of Forest and Environment............................................................. Rs 15.56bn
Ministry of Culture, Tourism and Civil Aviation.............................................. Rs 11.96bn
Ministry of Industry, Commerce and Supplies.............................................. Rs 9.46bn
Ministry of Communications and Information Technology............................ Rs 8.71bn
Ministry of Labour, Employment and Social Security................................... Rs 8.08bn
Ministry of Land Management, Cooperatives and Poverty Alleviation.......... Rs 7.24bn
Source: Budget speech
Other highlights
- All incentives and additional allowances given to government employees to be curtailed
- A feasibility study of cannabis farming for medicinal use to be conducted
- Migrant returnees to be encouraged to set up business in Nepal
- Civil Aviation Authority of Nepal (CAAN) to be unbundled
- Self-employment loans for players
- Special climate projects to be launched in 43 local levels
