Finance Minister Ram Sharan Mahat has presented the national budget for the fiscal year 2006-07, based on the assumption of peace, with an outlay of Rs.144 billion — Rs.32 billion more than the current-year estimate. To make this possible, he has had to rely even more on internal borrowings, to be up by Rs.6 billion, as well as on foreign loans and grants, which are dependent on the goodwill of donors. Following the recent Jana Andolan, the government faces the tasks of reconstruction and rehabilitation as well as speeding up development

work as the public expectations have shot up. This calls for more resources. It has enlarged the budget for the social sector such as education and health, and focuses, rightly, on the development of the Karnali region and rural development, through the construction of infrastructure, job creation and income generation. Security expenses have come down (by Rs. 600 million); so has the royal palace budget considerably, vis-a-vis the sudden multi-fold hike during the active royal rule.

Direct transfers of funds from the centre to VDCs for village development have been doubled from Rs. 500,000 to a million rupees, a welcome development; but whether these can be implemented without some understanding with the Maoists is another matter. But the funds for each parliamentary constituency to be used at the discretion of the MP concerned is not well-advised, all the more so because of the unrepresentative nature of the restored parliament. Overall, there seems to be no reason to find fault with the budget’s developmental focus in a significant way. What is much more important is whether the plans are carried into action, an area in which the country’s all the past budgets have left much to be desired. Besides, the finance minister has made only minor adjustments with the tax rates, and given the rate of collection, the revenue target of Rs. 85 billion appears to be overstated, against Rs.73 billion for this year. Similarly, the projections for foreign grants and loans look inflated when set against the current-year figures.

That the security budget, which had doubled since 2000, is estimated to be down from 3.2 per cent of the GDP to nearly 3 per cent does not perhaps reflect the changed situation, as it is not a noteworthy reduction. Capital expenditure, put at Rs.45 billion, too, may be fine, but the problem with the government has always been that it fails to spend it all, let alone properly, and much of it is often rushed towards the end of the fiscal year to prevent the budget from being frozen. The 21 per cent hike in recurrent expenditure calls for a special effort to cut unproductive expenses. No less important is the need to crack down on corruption, which has sent the best-laid plans haywire in the country. And wedded to it is transparency. A question also arises as to the longevity of the budget after the formation of the interim government, in light of Maoist leader Dev Gurung’s reaction that his party cannot endorse it.