There is nothing to be gravely disappointed in, but Khatiwada seems to have squandered the opportunity to make the budget a watershed in Nepal’s economic reforms

Finance Minister Yubaraj Khatiwada presented the federal budget of Rs 1,315 billion for 2018-19 in Parliament on Tuesday. The budget this time was keenly awaited for a number of reasons. This is the first budget after the federal, provincial and local elections were held under the new constitution. The budget was first by the strongest government ever in the country in more than last two decades. The budget follows the government’s policies and programmes in which it announced this fiscal as the “base year” for “prosperity” – an agenda on which the left forces rode to power. While making a pitch for “stability for prosperity”, two communist forces (now Nepal Communist Party) had floated an ambitious manifesto. Last but not least, Khatiwada himself is known as a well-versed economist who can delve into complex economic details and provide not only solutions to Nepal’s financial woes but also guide the country towards development and prosperity.

All in all, there is nothing to be so gravely disappointed in the finance minister. What is commendable is Khatiwada has aimed financial discipline. He has refrained from introducing an inflated budget. A bloated budget not only makes it difficult for the government to mobilise financial resources, it also prevents the government from meeting its expenditure target. He has bucked the trend of the last two years. Change in income tax slabs to 10, 20 and 30 per cent from earlier 15 and 25 per cent is a progressive move. And of course, he has stopped himself from introducing populist programmes, which his party is very well known for – a quick recap of the manifesto will provide with ample evidence. He, however, seems to have failed to resist pressure to set aside fund for lawmakers and announced Rs 40 million each for the development of 165 federal constituencies, albeit under a different heading with some new provisions inserted. Khatiwada’s budget, however, has incorporated all the aspects that a regular budget should. And this very fact gives rise to some reservations.

There were high hopes that Khatiwada’s budget would have some substantial departures – that he would announce some groundbreaking projects in line with the government’s policies and programmes in which it had outlined what it wants to achieve in the next five years and that he would introduce some revolutionary programmes to give a fillip to investment and employment. But the budget lacks the vision. Nepal is now energy sufficient – 456MW of electricity is set to be added to the national grid very soon after the completion of the Upper Tamakoshi Hydroelectricity Project – but the budget is silent on ways to utilise that power and up the industrial consumption of electricity. Through the first federal budget, Khatiwada had the opportunity to make it a watershed in Nepal’s economic reforms, but it looks like he has squandered it. He has stopped short of announcing confidence-boosting plans for the private sector, while the industrial sector has little to rejoice. There were expectations that the monetary economist would show his mettle and make some bold moves. But expectations are not always met. Implementation will be the key now. Over to the government.

Row over resources

Confusion has arisen at the local levels over the jurisdiction of some natural resources as to who should be responsible for their management and sharing of revenue and benefits. A recent study conducted by Democracy Resource Centre in 90 local levels in 43 districts found that local levels were confused regarding the sharing of natural resources such as water, forest and tourism sites. In some cases, boundaries of adjoining local levels were yet to be settled as their initial boundaries were made in ad-hoc manner.

The study has also found that whatever laws the local levels have lack clarity in a number of areas, including sharing of water and forest between the two different local level units and provincial governments. Most of the laws, the study said, were found to have drafted by elected officials with assistance from the government employees without consulting the legal experts on related areas. There is a risk of conflict between the local levels and provincial governments over sharing benefits from the natural resources. This issue must be addressed by the provincial assemblies by making appropriate laws.