Fiscal deficit cannot be reduced to the desired level unless the government takes measures to increase the production base
It has become commonplace to come up with a "white paper" on the economic health of the country every time a new government is formed, only to blame the erstwhile administration for what went wrong on the economic front. When CPN-UML leader K P Sharma Oli formed a majority government in February 2018, following the first general election under the new constitution, his finance minister Yuvaraj Khatiwada, also the former governor of the Nepal Rastra Bank, painted a bleak picture of the country's financial health and breach of fiscal discipline by his predecessors. He vowed to improve fiscal discipline and put the economy on the right track by introducing drastic measures. Khatiwada, however, failed miserably to make corrections in the fiscal loopholes that he was well aware of as an economist and also as former vice chairman of the National Planning Commission. This time around, Finance Minister Janardan Sharma has also squarely blamed the Oli administration for unveiling a huge federal budget as in the past, without considering the status of the treasury, which, he said, resulted in running a whopping deficit of Rs 143 billion.
Addressing the House of Representatives (HoR) for the first time since his appointment as Finance Minister, Sharma announced that he would table a replacement bill to address the shortcomings of the federal budget by encompassing the concerns related to the coronavirus situation, policies and priorities of the Deuba-led coalition, public aspirations as well as the common minimum programme finalised by the coalition partners. Finance minister of the Oliled government Bishnu Paudel had presented the annual budget for fiscal 2021/22 through an ordinance on May 29, a week after the dissolution of the HoR for the second time. Sharma admitted that it was impossible to achieve 7 per cent economic growth in the last fiscal.
The fact paper revealed that the consumption-to-GDP ratio, which was 87 per cent in fiscal 2016-17, had gone up to 93.4 per cent in 2020-21. The household savings-to-GDP ratio is estimated to have slumped to 6.6 per cent in last fiscal from 13 per cent in 2016-17. The ratio of national savings-to-GDP, which stood 41.7 per cent in fiscal 2016-17, is estimated to have dropped to 31.4 per cent in 2020-21.
He said 18.7 per cent of the country's population still lived below the poverty line and more people were at risk of falling into that category due to the pandemic.
Although Sharma vowed to introduce financial packages for those affected by the pandemic, there is limited scope to do so given the economic recession in the country largely due to the prolonged lockdown and prohibitory orders imposed across the country to break the infection chain of COVID-19. Fiscal deficit cannot be reduced unless the government takes measures to increase the production base, which is next to impossible without bringing the pandemic under control. It will become clear whether the government is moving in the right direction to bring the fiscal deficit to the desired level only after the replacement bill is tabled and passed by the parliament.
But even for the replacement bill, the coalition partners need to reach consensus.
Growing more rice
If only Nepal could produce enough rice to feed its population, it would save the country more than Rs 30 billion a year in imports. The country currently produces 3.35 million tons of rice annually against a demand of 4.76 million tons. Now a five-year project to develop hybrid varieties of rice by identifying indigenous and wild varieties of rice in Nepal is expected to help the country become self-sufficient in the staple crop. Dubbed the Hybrid Rice Technology Transfer Project, the IRRI will hand over to Nepal Agricultural Research Council the science, technology, skills and capacity to develop the overall hybrid rice technology in the country itself.
We don't need to look far to see what hybrid rice can do to feed large populations. Hybrid rice was first grown in China by scientist Yuan Longping, which has helped feed a fifth of the world's population using less than 9 per cent of the world's total land area.
Average hybrid rice yields have more than doubled compared to the conventional breeds in countries where they have been introduced. The commercialization of hybrid rice, which is more productive and climate resilient, would greatly improve the living standard of Nepal's farmers.
A version of this article appears in the print on August 12 2021, of The Himalayan Times.