The Rs.127 billion national budget for the year 2005-6 presented by finance minister Madhukar SJB Rana on Saturday makes no important departures from the policy thrusts of the previous budgets, and this continuity is also reflected in its bloated size, irrespective of various hard realities. Rana has made too many promises, as his predecessors had done. Every finance minister in Nepal knows that even though he cannot fulfil most of the pledges at year-end, these will not persist in the amazingly short public memory. For example, now, except for a handful of experts, nobody talks about the promises unkept and unfulfilled. This explains why Rana has swelled it by some Rs.11 billion, up from Rs.116 billion last year, though the total revised expenditure is put at about Rs.101 billion. Even here, development spending has fallen far short of the estimates, whereas the non-productive regular expenses have exceeded the projections, for example, in security expenses, for which a special tax was imposed and the VAT rate, partly to meet security needs, was hiked by three per cent in the middle of the year. For this year, the capital budget has been estimated at over Rs.37 billion, though a good part of a smaller capital budget last year lay idle. The estimate for recurrent expenditure stands at some Rs.76 billion.

So the non-productive recurrent expenditure is worryingly more than double the capital expenditure. One positive aspect is that the money for the social sector such as education and health has been increased. But the problem is that a considerable part of it tends to come back to Singhadurbar having been unused, while regular budgets are rarely unspent. The deficit comes to a whopping 12.5 per cent of the total budget, exceeding the prudential norms by far, with the potential of fuelling inflation, as most of the money goes into non-productive activities. The foreign aid component (grants and loans) comes to over Rs.33 billion, accounting for about 90 per cent of capital expenditure. According to the latest Economic Survey, last year’s GDP growth rate is just two per cent, but the budget makes a GDP projection for this year of 4.5 per cent without any sound basis. This borders on the unrealistic.