Nepal | July 16, 2019

EDITORIAL: Ambitious budget

The Himalayan Times

The budget for the next fiscal year looks ambitious and unrealistic given the government’s weak spending capacity

Finance Minister Yubaraj Khatiwada on Wednesday presented an ambitious federal budget of Rs 1.532 trillion for fiscal year 2019/20 in the joint session of the Federal Parliament, with emphasis on infrastructure and agriculture, without any strong institutional mechanism to utilise the capital expenditure. The budget, which is 18 per cent more than that of the current fiscal, has also drawn flak from different walks of life for being too “populist” and “distributive”. The proposal to allocate Rs 60 million from the current Rs 40 million to each of the 165 lawmakers under the constituency development programme, raise the social security allowance to the elderly and others by Rs 1,000 per month and salaries of civil servants by up to 20 per cent, and other populist programmes aimed at providing jobs to around 5 lakh youths next fiscal year have been criticised not only by the opposition but also by independent economists, who fear the moves will create inflation in the market. The budget aims to achieve 8.5 per cent economic growth and keeping inflation at 6 per cent.

Out of the total budget, Rs 957.12 billion is recurrent expenditure while it has earmarked Rs 408.59 billion as capital expenditure, less than half of the recurrent expenditure. The government has set a target of collecting revenue of Rs 981.12 billion, a target economists say is not possible. The budget has transferred Rs 99.85 billion to the seven provinces and Rs 213.82 billion to the local levels, in equalisation and conditional grants. Both the grants given to the provinces and the local levels make up 6.5 and 14 per cent, respectively, of the total federal budget.

The way the budget has been earmarked, it shows the Centre has not respected the principles of federalism. And it echoes the PM’s recent public statement that the provinces are the extended units of the Centre. The provinces have not been given any role to play in development activities. Even the special economic zones to be built in each of the provinces will be handled by the federal government. The local levels have received a good chunk of the budget, and the provinces, sandwiched between the Centre and the local levels, are left without any major role to play within their jurisdiction. Although sections of the private sector have shown reservation about the budget for putting the state at the heart of development, it has tried giving a boost to domestic and export-oriented industries by imposing hefty customs duties on luxurious items and other imported goods that can be produced in the country. The finance minister should, however, have given some incentives to the private sector to set up industries that use maximum energy that will be in surplus from next fiscal. Reforms, such as merger of banks and financial institutions, bringing in strategic partners in enterprises and 10 per cent rebate on VAT levied on total transaction made by customers through digital payments, are positive aspects though. The government’s emphasis on promoting agriculture is a welcome move as it will give a boost to this sector. On the whole, the budget looks ambitious and unrealistic, given the government’s weak spending capacity. No economic growth is possible unless the government institutions are capable of utilising the capital expenditure in the development projects.


Education for all

Yet another news story of how children suffer for lack of a school in their village. It hasn’t actually barred them from receiving an education, but they are forced to attend school in nearby India. Children of Hausalpur village in Kailali in far-west Nepal join an Indian school because the nearest school in their area is across a river without a bridge. As a result, the children speak Hindi, apart from their Tharu tongue, and sing the Indian national anthem to start the day. But they do not know the Nepali national anthem. Even the adults have difficulty communicating in Nepali as they are cut off from the rest of the country.

The government has the obligation to bring its people together so that there is a sense of belonging to this country. The people’s well-being, no matter where they live, should be the government’s concern. Only then can we promote nationalism and patriotism. It is good that the local level is thinking of running a school in the village from the next academic session regardless of the number of students. The lawmakers could also divert some of the pork barrel into the village school, now that it has been hiked from Rs 40 million to Rs 60 million in the new budget.

 


A version of this article appears in print on May 31, 2019 of The Himalayan Times.


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