How the remaining capital allocation will be spent in the next six months is a moot question
Given the extreme resource constraint, the government of Pushpa Kamal Dahal has reduced the size of the budget of the current fiscal year 2022-23 by 14 per cent compared to the initial allocations made in the budget presented in May last year.
Presenting the mid-term evaluation report of the current financial year in the Parliament on Sunday, Minister for Finance Bishnu Paudel said that the expenditures for the fiscal year had been revised downward by Rs 2.43 billion to Rs 1,549.99 billion from Rs 1,793.83 billion.
Accordingly, recurrent and capital expenditure and financing management allocation have been adjusted.
Thus, recurrent expenditure has been trimmed from Rs 1,183.23 billion to Rs 1,021.92 billion, capital allocation from Rs 380.38 billion to Rs 313.5 billion and the financing budget from Rs 230.21 billion to Rs 214.21 billion. According to the minister, the government was forced to take the step in order to balance the budget as the revenue collection target has been slashed to Rs 1,244.75 billion from the initial Rs 1,403.14 billion.
Even meeting this revised target is going to be an uphill task with revenue collection in the first half of the current fiscal year limited to Rs 490.4 billion against the initial target of Rs 651.6 billion, a drop by 24.8 per cent.
Since the start of 2020, Nepal's economy, as in the rest of the world, has been battered by unforeseeable circumstances. There was the coronavirus, which led to the shutdown of the entire country for months on end, bringing manufacturing, tourism and foreign employment to a grinding halt and throwing millions out of work. Just when the COV- ID-19 pandemic was starting to slow down, the Russian invasion of Ukraine in February last year disrupted supply chains around the world and pushed up the price of oil and gas, badly impacting food supply and economies around the globe. In view of the sharply dwindling foreign exchange reserves of the country, the government took the right step to put restrictions on the import of 10 non-essential luxury goods– from expensive mobile phones to SUVs – in April last year.
However, this proved counterproductive, as it affected revenue collection, and the ban was lifted in December following improved remittance inflow.
Actually, the reduced size of the budget should not be of much concern to anyone. Governments have the habit of allocating resources that they know cannot be mobilised or spent. The economy will expand only where the capital expenditure is well spent. Unfortunately, year in year out, the poor spending of the capital expenditure has been a problem, and no government has been able to do anything about it. Capital expenditure in the first half of the current fiscal year is just Rs 53. 4 billion – a mere 17 per cent. So how the government intends to spend the remaining Rs 260 billion in the next six months is a moot question.
There is a need for the economy to veer away from being over-dependent on remittances, which help pay for imports that are ten times the country's total exports. Unless we improve our exports to balance our burgeoning imports, we will always be short of resources to achieve our goals of development and prosperity.
A version of this article appears in the print on February 14, 2023, of The Himalayan Times.
