The quarrels over the division of power among the political parties are delaying government formation, and this delay is taking its toll in several ways, including on the upcoming national budget for the fiscal year 2008-09. A Maoist-led government is expected to present the first national budget of Republican Nepal. The heightened popular expectations on the one hand and the bad shape of the economy on the other, with piles of problems accumulated over the years, will make any finance minister’s task extremely difficult. The new economic managers, as they have championed the agendas of political and economic ‘revolutions’, will want to leave their imprint on the economy. But it is barely a month before the new budget is presented. The new Council of Ministers will have to be formed and the Common Minimum Programme of the governing coalition finalised. The new government will require some time to adjust to the new environment. Will it have the time necessary to make the budget sufficiently distinct from the accountants’ concept of budget-making that the civil servants are often associated with?

The economy today is in a worse shape than at any time in many years. The old pattern of Nepal’s budget mix is not going to be any different this time, too — the government’s revenue hardly enough to meet its current expenditure, and the development part of the budget to be wholly financed by foreign loans and grants. A completely new government leadership and great public expectations are not an odd combination. But the new government will have to be honest by laying before the general people the exact economic situation, telling them what to expect, and delivering on it, and what not to expect, until the next general election. Indeed, Maoist leaders, including Prachanda, have tried to rein in expectations by saying that their government leadership should be taken as signs of the future, the morning-shows-the-day approach to judging their performance.

Nonetheless, the short-term tasks are tough and various. The current Three-Year Interim Plan needs to be rewritten; and the donors convinced of the government’s policy and programmes. There is the overdue task of increasing the petroleum prices, which have doubled in the international market since the last budget was presented. The government will have to end the acute shortages going on for over two years and to recover the cost of oil through wise price adjustments, including reasonable tax cuts and cross-subsidisation. Most economic indicators are not very encouraging. Inflation is moving along at a double-digit rate, which will be made worse by the inevitable oil price hikes. Large and competing needs and severe resource constraints will make budget-making a delicate balancing act in order to avoid exceeding the danger mark of budgetary deficit. And there is an alarming balance of payments gap with India. These and other problems will require unpopular decisions. The government will also have to deal firmly with a number of other evils, such as official corruption. The new government should show the signs of the future by doing something visible on these fronts.