Down to earth

Finance Minister Dr Ram Sharan Mahat presented a Vote-on-Account Bill of Rs.73.54 billion in the Constituent Assembly (CA) on Monday, and the CA immediately and unanimously passed it without any discussion or even a question. Nor did the public have any time to comment on it before its passage. Granted, there was no time left for all this, as the new fiscal year (2008-09) commences today; but for the Bill’s passage, all government transactions would have ground to a halt from today. However, the government and every political party knew

from the start that they would face this problem if the new government were not sworn in well in time. As a result, in the budgetary history of Nepal, this is the first time that the government has not been able to announce an annual national budget, affecting a lot of things adversely. This constitutes a gross example of political incompetence and

irresponsibility, as the CA was not allowed to settle the issue of government formation as soon as the full results were out.

The new government will present a supplementary budget for the remaining period of the fiscal year. And it will announce its policy and programme and priorities. Therefore, the vote on account does not merit particular comment, as it continues the existing state of affairs. However, the finance minister told the CA that the ‘micro-economic indicators are positive and we have maintained fiscal discipline’. Dr Mahat repeated what he had been claiming for some time that ‘we’re handing over the economy in good condition’ to the next government. Statistics confuse the layman, particularly the jumbled figures, and they cannot get any meaning out of them. A higher GDP growth projection for this year is based mainly on a good agricultural production, which almost entirely depends, in Nepal, on the unpredictable monsoon. Next year, the GDP figure could well drop if the monsoons were bad, hitting farm output hard. One should also bear in mind that the GDP figure appears inflated in real terms as it is calculated on a low base in the past.

To come down to earth, we should also consider the fact that huge remittances from abroad led to huge imports, which, in their turn, generated more revenue in terms of customs and taxes. Trade deficit with India alone hovers at around Rs.100 billion (exclusive of petro-products). The rate of inflation has also been worrying — and it is perhaps the highest in food and beverages . Budgetary deficit has gone up on last year. Statistics also show Nepal fares badly when it comes to inequality of income vis-à-vis other countries. As many economists have pointed out, the uncertainty about the Nepali exchange rate — it is thought to be unrealistically high against the Indian rupee — is reported to be having an unfavourable economic impact, for instance, contributing to ‘capital flight’. Of course, during the 10-year insurgency the Nepali economy has been hit hard. It is yet to recover. These and other facts present huge challenges to the Nepali economy, and they do not point to a satisfactory state of affairs. Now, it is the duty of all the political parties to make economic growth and development their main agenda.