Nepal | July 07, 2020

EDITORIAL: Low spending

The Himalayan Times
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It is the government which needs to make massive investment in infrastructure development in targeted areas. No growth is possible unless the government increases its spending capacity

As usual, the government has not been able to spend the development budget in its targeted and national priority projects.

The slow pace of government expenditure in relation to resource mobilization in the past nine months of fiscal 2016/17 has resulted in Rs. 235 billion being idle. Had this budget earmarked for the national priority projects been spent on time the gross domestic product could have doubled the current rate of economic growth and millions of people would have also got job opportunities within the country.

According to the central bank’s latest report, the government has been able to spend only 46 percent to the tune of Rs. 419.93 billion. Last fiscal year it was up by eight per cent to Rs. 286.54 billion. Although it is an encouraging sign that the government has increased its spending capacity institutional reforms are needed to enhance its capacity.

The spending has not increased in response to the revenue collection which surged up to 44 percent largely because of import of goods for consumption and reconstruction work. The government also had a budget surplus of Rs. 63.59 billion in the first nine months of the last fiscal but the budget slipped into deficit by Rs. 10.34 billion in the review period.

The overall balance of payments recorded a surplus of Rs. 50 billion in the first nine months compared to a surplus of Rs. 163 billion in the same period last fiscal. It means that the government has spent more money on debt servicing this fiscal.

A disappointing scenario is that the country has exported goods amounting to Rs. 55 billion whereas goods amounting to Rs. 726 billion were imported in nine months of the review period.

The country’s balance of payments has been maintained not because of export but because of remittance money which has also gone down for the past couple of years, especially after the 2015 earthquake that forced many youths to stay home to rebuild damaged houses. All this shows that the macroeconomic condition has slid toward a negative trend.

In order to address the problem of trade deficit and declining balance of payments the government has to come up with a long-term plan so that import can be minimized and export maximized.

One positive aspect of the current fiscal is that the government has somehow been able to reduce power cuts in major cities and industrial areas. In a couple of years to come more electricity will be generated from within the country, and it will help boost the country’s economy.

With regular supply of energy it is expected that the private sector and foreign direct investment will also come to make ways in productive sectors such as energy, tourism, agriculture and manufacturing. But regular supply of energy is not the only condition that may help attract more investment. Other conditions such as labour-employer relations and legal provision of repatriation of profit from investments should also be investment-friendly.

However, it is the government which needs to make massive investment in infrastructure development in targeted areas which will pave the way for faster growth. No growth is possible unless the government increases its spending capacity.

No-horn drive

The introduction of the No Horn Drive after the beginning of this Nepali new year has had a positive impact on the safety of all those using the roads. The Metropolitan Traffic Police recorded a massive 50 per cent decrease in the number of road accidents in the Kathmandu valley.

The valley used to see more than 22 accidents every day. Now it is reported that on an average only seven to 10 accidents occur daily. This is no mean achievement in making commuting in the valley safer.

With the introduction of the No Horn Drive, vehicle drivers are learning to become more patient while on the road. The impressive decline in the number of road accidents can also be attributed to the rising of awareness and the compliance with the traffic rules and regulations.

So it is fitting for the campaign of No Horn Drive to be enforced without any leniency. The traffic in the Kathmandu valley seems to be safer with fewer accidents as the vehicle drivers these days are not permitted to use their horn needlessly.

This campaign should be a sustained one considering the benefits that are already being witnessed.



A version of this article appears in print on May 18, 2017 of The Himalayan Times.

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