Finance Minister Babu Ram Bhattarai, in his recent budget speech correctly depicted the overwhelmingly rural character of Nepal’s massive poverty, but most of his proposed instruments to reduce it are second-hand and chronically ineffective. Like the CPN-UML’s 14-year-old slogan, “Afno Gau Afai Banau” (Let’s Build Our Village Ourselves), the Maoist finance minister too has come up with a copycat version of Hamro Gaun Ramro Banau (Let’s Improve Our Village). Similarly, like the former, he too has relied on block grants to the local bodies to achieve it, this time, more inflated to Rs. 1.5-3.0 million per VDC. While the UML did so with an eye on what turned out to be their abortive bid to hold mid-term election, the Maoists may have been motivated similarly.

By and large, the Maoists seem to have failed to realise that the tradition of inflated block grants started by the UML has largely been sub-optimal in its results, if not outright counterproductive. Briefly stated, despite the huge sum of money doled out in such grants ever since, the country’s rural poverty and backwardness have only worsened over the years. In 2001 the urban per capita GDP (in US$ PPP) was 2224, and the rural 1162. Land scarcity relative to population continues to accentuate rural poverty. While the per capita land availability in 1954 was 0.6 ha, in 2005, it has come down to 0.1 ha (9.5 persons per ha), thus continuously aggravating the problems of food scarcity, under-employment and malnutrition.

Besides, the under-employed workforce remains virtually trapped in rural areas. While our surplus rural labour is largely unskilled, only 20% of slots in the manufacturing sector, otherwise the biggest employer of labour, are for the unskilled. Our landlocked geographical location has also kept our manufacturing sector chronically miniscule, a situation made worse by prolonged Maoist insurgency. The block grants have done little to alleviate this difficult situation. Following the restoration of democracy in 1990, the country is now dotted with local self-help groups that generally promote micro finance-based income generating activities for the poor who are also invariably land-poor. They engage in a mix of agricultural and non-agricultural pursuits: livestock raising, trading, home industries, and so on, that bring more employment, more earning and food security for themselves. But the grant money itself is mostly spent as supplementary funding for local schools and the rest equally distributed among the ward leaders to be spent on petty things, and often in opaque manner.

Therefore, if the “people’s warrior” finance minister wants the poor to genuinely benefit from this vast sum of scarce resources, the spending rules of the VDCs and DDCs have to be fundamentally re-written by amending the donor-wrecked, so-called Local Self Governance Act and empower the stakeholders themselves.

Another stale trick included in the budget is the writing off of the small bank loans. In 1990, NC leader Girija Prasad Koirala tried his best to forgive Agricultural Development Bank (ADBL) loans of up to Rs 5,000. But the then finance minister, Devendra Raj Panday, resisted it because it would have amounted to subsidising the better-off people at the expense of the poorest who hardly transact with banks but remain indebted to usurious village money lenders.

The so-called debt forgiveness can be counterproductive for the functioning of self-help organisations such as the Small Farmer Coops, which borrow in bulk from the ADBL and retail among their members. While timely borrowing and repayment of loans have been at the heart of small farmers’ successes in their income generating enterprises, such write-offs only bring unwelcome distortion for them. Thus, it is time that the government learns from people’s successes and builds on them.

Another area of vital concern for rural people is education and the finance

minister has rightly lamented its poor quality in government schools even as their teachers are generally better paid than their counterparts in the private schools. The problem lies in the politicisation of the teachers who work as party cadres in the villages. The need is to make the teachers exclusively accountable to the parents in the communities. But in Nepal, politics has always defeated statesmanship.

The government has also announced many other measures such as continuation of the so-called and largely ineffective employment promotion initiative in Karnali. Similarly, the heavily-funded Poverty Alleviation Fund’s modality needs urgent reform. Even the provision of increased investment in agriculture has to be tailored to the needs of the land-poor farmers. All these initiatives can be made more meaningful only with the participation of the stakeholders. Therefore, more than money, devolution of authority to stakeholders is needed for effective poverty reduction and rural development.

Shrestha is a development anthropologist