The Finance Minister's decision not to seek any "legitimate sources of investment" has put the country's image at risk
Although Finance Minister Janardan Sharma has brushed aside the growing rumours that the country's economy is in bad shape, all fiscal indicators do not support his claim. Since his appointment as Finance Minister five months ago, he has made changes in one or the other rules in the fiscal policies to benefit a certain group of entrepreneurs, severely impacting revenue from imports. Over a dozen decisions made by the Finance Minister have helped a certain group of businessmen to make more profit, instead of contributing to increasing revenue in the national coffers and providing relief to the general people. Sharma's obscure decision not to seek any "legitimate sources of investment" has put the country's image at risk at the international level. This decision has encouraged a certain group of people to bring in money from tax haven countries, where money earned from unknown sources of income is parked and channeled to other countries using "policy hack" just like what has now happened in Nepal.
When Sharma presented the replacement budget in the parliament shortly after forming the coalition government, led by NC chair Sher Bahadur Deuba, he had inserted a clause of 'not seeking any sources of income for investment', a policy that raised many an eyebrow even among the coalition partners.
After the coalition government came to power in July-end, remittances have gone down, resulting in shrinking of foreign currency reserves and increasing trade deficit.
There is a problem of liquidity crunch in the market as the government has failed to increase the capital expenditure and raise revenue from imports and excise duty as the Finance Minister has offered undue benefits to select business groups through policy-level decisions in the guise of promoting a self-reliant economy and creating employment opportunities in the country. The changes made on import tax on certain goods, such as import of raw materials for the production of iron rods and zinc sheets, have had a negative impact on revenue collection.
After facing widespread criticism from all walks of life, the Finance Ministry has now taken two policies to bring improvement in the economy's health. In its recent letter addressed to Nepal Rastra Bank and the Comptroller Office, the ministry has stated that banks and financial institutions (BFIs) can keep 80 per cent of the unspent budget of the local levels in deposits till the next fiscal. This provision is expected to add around Rs 50 billion to the BFIs, which should help address the liquidity crunch in the market. Another decision taken by the ministry is to impose a restriction with a provision of 50 to 100 per cent margin requirement on the import of around 300 goods aimed at increasing the foreign currency reserve. The goods include, among others, private cars (except for electric cars and disability-friendly cars), motorcycles, tobacco, wood and furniture, chocolate, chewing gum, playing cards, footwear, plywood, silver and alcohol. The central bank has stated that a 50-100 per cent margin requirement was introduced on these goods to make improve the growing deficit in the balance of payments and declining foreign currency reserve.
This provision is expected to control the import of goods worth Rs 100 billion.
Ratify ILO convention
Stakeholders have urged the government and lawmakers to ratify the Violence and Harassment Convention (2019), or ILO Convention 190, which makes the employer responsible for ensuring a safe working environment for the workers, with the government not needing to worry about any liability issues.
It is a comprehensive UN convention which deals with all aspects and violence and workers against the workers, in particular women, in both the formal and informal sectors. Nepal does have anti sexual harassment laws in place, but, according to the stakeholders, ratification of ILO Convention 190 is necessary to fill in the gaps in the laws.
The Ministry of Labour, Employment and Social Security has just begun formal discussion on the issue, and it is for sure that the private sector will have reservations about it as the convention's ratification will entail greater responsibility on them. Under the convention, the employer must ensure not only a safe working environment at the workplaces but also during the journey to and from them. With jobs scarce in Nepal and millions of people working in the informal sector, how the government can enforce the convention once ratified is a moot question.
A version of this article appears in the print on December 22, 2021, of The Himalayan Times.