Laxmi Capital News
'Budget has dampened expectations of people'


The fiscal budget for 2018-19 unveiled last week by the government hasreceived mixed response from stakeholders. While some are saying the budget isrealistic, visionary and has set tangible targets, others say that it is only acontinuation of the budgets of previous years and has not introduced any newsubstantial programme. In this context, 
Sujan Dhungana and Umesh Poudel of The Himalayan Times spoke to KushumShakya, head of Central Department ofEconomics, Tribhuvan University, to know about the budget, its strengths andweaknesses. Excerpts:      

Thegovernment last week unveiled the country’s first federal budget worth Rs 1.31trillion. How far has the budget addressed the country’s necessities?

We should bethankful to the government for unveiling the fiscal budget on schedule.However, I do not think that this budget has addressed the expectations of thecountry’s politics and the new Nepal that we have been talking about. As aresult, the budget faced criticism immediately after it was endorsed, especiallyin Province 3 and Karnali region. The budget is subject to criticism especiallybecause it seems to have  not addressed federal, provincial and localissues properly. Though the implementation of federalism was expected to takeSinghadurbar to the local level, the government has maintained autonomy inresource allocation and other powers at the central level through the budget.Similarly, this budget has not been able to allocate enough resources to thedevelopment sector while it has allocated more resources for recurrentexpenditure. As the country has always faced a problem in spending thedevelopment budget every year with a majority of such funds being spent towardsthe end of the fiscal year, the government should have introduced a mechanism throughthe budget to assure that the development budget is spent properly and on time.However, this issue was not addressed in the budget. Federalism is all aboutprioritising development agendas targeting the progress of every nook andcorner of the country equally. The budget has failed on this front as well.Similarly, I believe that the government should have brought a bit bigger-sizedbudget as the local and provincial governments are going to need huge supportto manage logistics. In the pre-budget discussions, all of us were expectingthat the budget would be around Rs 1.5 trillion. I am not aware what encouragedthe government to make the budget size smaller.

However,bringing a large-sized budget amid limitations of resources is a challenge tothe government. How do you think can the government address the fiscalresources deficit?

I believethat the finance minister brought a small-sized budget in an attempt to matchthe supply-demand chain of resources. However, it is also undeniable thatdevelopment processes and effective implementation of federalism requires morebudget and more resources. It is up to the government on how it plans to managenecessary resources. The government should bring more people and businessesunder the tax net, seek ways to increase internal borrowing and foreign grants,and boost foreign direct investment in the country that will assureavailability of necessary resources for the government. It has to be noted thatit was the ruling party that formulated mega populist agendas prior to theelections and raised the expectations of the people. Among others, the rulingparty had vowed to increase the old-age allowance for senior citizens to Rs5,000 in its election manifesto. The budget has dampened such expectations ofthe general people. In this sense, the budget has deviated from the ‘dreams’circulated by the ruling parties in their election manifestos. It ischallenging for this government not only to manage adequate resources for theimplementation of federalism but also to preserve the country’s politicalreforms and achievements made so far.

Howfar has the budget addressed issues related to women?

It isanother negative aspect of the budget that it is not inclusive. The budget hasmerely addressed Nepali women, their empowerment and entrepreneurship growth.Allocation of a small amount of resources for the President Women EmpowermentProgramme and increment in the Safe Motherhood Allowance for pregnant women arethe only two women-related issues that were placed in the budget though thereare hundreds of issues that the government should have addressed in a bid toempower women in the real sense. Nepal is an agricultural nation with almost 70per cent of the population directly or indirectly involved in this sector. And itis to note that almost 80 per cent of the population engaged in agriculture iswomen. However, the budget failed to introduce programmes that encourage womenwho are involved in the agriculture business. Today, women are working morehours than men. Thus, there has to be economic valuation of even householdworks performed by women. Though the ruling party highlighted the concept ofsocial inclusiveness prior to the election and formation of the government, thebudget has failed to address it.

Despitethese pessimistic notes, the government has set a few targets in the budgetrelated to revenue, per capita income, tourism and economic growth, amongothers. How tangible are they?

It is easyto numerically set growth targets but difficult to turn such targets intoreality. I believe that a majority of targets of the budget irrespective of anysector are quite ambitious. The government lacks clear vision to achieve allthe development targets set in the budget. With the current deficit ofinfrastructure in the country, it is not possible to draw two million touristsannually by 2020. Similarly, the eight per cent economic growth target is alsounlikely to be met as a majority of resources the country has today will beused in the logistics of provincial and local governments. We cannot presumegrowth in any sector unless development activities pick up pace. Similarly, Iam doubtful that provincial and local governments will be able to provide anotable development output at the end of this year due to lack of enoughdevelopment budget. Most importantly, the central government has concentratedmost of the power to itself, which will affect development activities at thelocal and provincial levels. As adequate authority has still not been delegatedto the local government, they will definitely not be able to function properlyin their day to day activities. Meanwhile, it is good that the budget hasannounced the issuance of loans of up to Rs 700,000 for youths againstcollateral of their academic certificates. However, the budget has notclarified on which academic certificate a person will be eligible to avail theloan and what other criteria should be fulfilled. Meanwhile, this programme isnot new and had been addressed in the previous years’ budget too. But it hasnot been implemented so far. It is to see how this government will prioritiseimplementation aspects of the budget and other policies and programmes. Thegovernment’s target to double agriculture production within the next five yearsis also ambitious as Nepal’s agriculture production heavily depends on themonsoon and irrigation facilities are not available everywhere. Similarly,availability of fertilisers and its distribution mechanism are very poor inNepal. The revenue target set by the government in the budget is also high. Butit can be met if the government focuses on widening tax net, improving taxadministration and enforcing tax-related policies effectively. In such acontext, government will face a tough time achieving the aforementioned ambitioustargets.

Theprivate sector has reservations on the budget citing that it has failed toaddress key issues related to the growth of the private sector. What is yourtake on this?

Thegovernment should acknowledge that the private sector is the real driving forceof the economy and the entire development process. Development goals can beachieved only through collaborative efforts of the private and public sector.The budget should have eased the doing business process and cost in Nepal,which is the only way to boost the morale of the private sector. Their keysuggestions have to be addressed in the budget and other policies andprogrammes of the government.

Source: The HimalayanTimes, 4th June 2018

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