There were disputes in favor and against the budget for Fiscal Year 2078/79 as soon as it was made public. It’s natural for political leaders to have differing views on the budget, but economists are no exception.
Former finance ministers and congressional economists, however, who attended a presentation on Sunday, uniformly rejected the budget. They voiced a common view that the budget was election-focused rather than directed toward growing the country’s economy during a budget assessment program held by the Congress-led School of Democracy. They also stated that implementing the budget is difficult.
The budget debate was attended by former Finance Minister Ram Sharan Mahat, former Governor Chiranjeevi Nepal, former Vice Chairmen of the National Planning Commission Dr. Shakar Sharma, Prof. Dr. Govindraj Pokhrel, Dr. Jagadish Pokhrel, and Economist Dr. Bishwa Poudel.
Dr. Mahat, a Nepali Congress leader and former Finance Minister, claimed that election-oriented activities were presented by artificially inflating the budget’s size. The budget, he claimed, was in violation of constitutional procedure, values, and standards.
“The budget will not be implemented in the future since the administration brought it in an incorrect manner,” he stated. “Only a few of the projects in this budget will be continued in the budget presented by the administration formed following the Supreme Court judgment or after the elections.”
He further claimed that the budget targets were artificial, as they were set by raising spending by 50% in an economy where even Rs 1100 billion could not be spent.
“A distribution-oriented budget was presented, distributing monies for the election and cadres without securing resources,” Mahat explained.
He claimed that the government set an overly ambitious 6.5 percent economic growth target in the budget. He said that last year’s economic growth was negative when the target was 8.5 percent, and forecasted that this year’s target of 7% growth would be limited to about 2% in fact.
Dr Mahat stated that the government has taken excessive external loans. “When I was Finance Minister around six years ago, the national debt was 25.6 percent,” Mahat added. “It’s now at 40%,” says the author. The per capita debt was 26,000 at the time, but in four years, this government has boosted it to 52,000.”
Mahat was enraged by the unjustified increases in social security benefits and pay. He claimed that the law had been broken in regards to employee wage increases.
Shankar Sharma, an economist and former Vice-Chairman of the National Planning Commission, said the budget for the 2018 fiscal year was presented in such a way that the 15th Plan’s ambitions would be pushed even higher. He charged the government with altering Schedule 1 of the budget in order to conceal current spending.
“This budget is presented in a unique way. The budget’s Schedule 1 has been reorganized, with the heading of current expenditures distorted. “Expense headings such as salary, allowance, social security, and so on are not shown,” he claimed.
He also stated that while 90% of current expenditures will be spent, just 80% of capital expenditures will be spent. When the full share of revenue is spent on operating expenses, Sharma believes it will be necessary to seek loans for development purposes.
“External loans and grants appear to be out of step with the budget aims as well. It appears that the fact that COVID has harmed not only Nepal but the entire world has gone unnoticed. We shall be in a financially hazardous scenario if this is the backdrop of expenditure and loans,” he said.
According to Sharma, the budget’s reduction of supplementary and special grants to provinces and local governments, as well as the increase in conditional funds, have generated concerns about the autonomy of local governments.
“The cost of conditional assistance is being raised by the federal government. As the number of conditional grants rises, questions about the state government’s and local government’s autonomy will be raised,” Sharma predicted.
According to him, Nepal spends the most on old age and social security benefits in South Asia. Sharma stated that the administration is very weak in terms of the economy and that achieving the 6.5 percent economic growth target set forth in the budget is tough.
Dr. Govinda Pokharel says that the political ambitions are strong.
Prof. Dr Govinda Pokhrel, former Vice-Chairman of the National Planning Commission, said the upcoming fiscal year’s budget had both positive and negative aspects. He claimed that the Finance Minister’s 500-point budget, which he presented for three hours, had strong plans for job creation.
While claiming that the budget addressed all difficulties, Pokharel pointed out that this is the budget’s biggest flaw.
“Political objectives, not economic roles, are portrayed in the budget,” he remarked.
Railways, tunnels, Chure conservation, and uranium are among the items in the budget that he criticizes. According to him, the budget will not be implemented since it includes initiatives that cannot be realized, such as the Prime Minister’s Employment Program, Prime Minister’s Agriculture Modernization Program, and Challenge Fund.
According to Pokharel, the budget has gone beyond discipline because it will take more than a year to establish the system required to achieve the budget’s goals.
“The expenditure and budget have been presented in this manner to make things easy for the cadres. “From a political standpoint, opposition parties should try to rein down budget spending by intervening and issuing regular warnings,” he said.
He objected to the security apparatus’ budget being increased by 13%.
“How come the budget for budget security is larger than the budgets for agriculture and energy?” He inquired.
“If the debt continues to grow at the same rate, it would reach 52 percent in the next two years,” Porkhel added, noting that this administration alone has borrowed Rs 560 billion in loans. It will bring the country’s economy to a crossroads,” he predicted.
Dr. Jagadish Chandra Pokharel claims it’s a sugar-coated budget
Jagdish Chandra Pokhrel, a former Vice-Chairman of the National Planning Commission, claimed there was no space for error in the budget due to the budget’s expenditure and income, as well as the Ministry of Finance’s framework.
“There is no room for the common guy to call out budget faults when looking at the budget expenditure, income, and the party’s manifesto,” he stated.
From an economic standpoint, Pokharel believes the budget given is inadequate. He claims that while the budget promises free drinking water and power, it is mute on capital formation.
“Even if the budget is expanded in size to enhance current expenditure, the revenue sources do not appear to approach capital spending. Pokharel stated, “The existing spending will be fully utilized.”
Pokharel cautioned that this would pose a significant economic challenge and make dealing with the resulting scenario tough.
“This government did not present a budget; it presented a manifesto, and it appears highly likely to lead to economic disaster,” he stated.
Even if it is said that foreign loans will be a resource, he believes that this is unlikely based on prior experiences. He stated that this government has failed to provide policy consistency over the past four years. The continuous variations in the tax paid on electric vehicles, according to Pokharel, have confirmed this.
“The tax on electric government vehicles was increased by 120 percent by Yubaraj Khatiwada, but it was decreased to 40 percent by the current finance minister. “We need to figure out why this was done,” he stated.
“It appears to be sugar-coated from an economic standpoint,” Pokharel added.
Dr. Bishwa Poudel discusses the complexities of implementation.
Dr. Bishwa Poudel, an economist, said that implementing the budget would be difficult. Poudel claims that the budget presented through an ordinance, as well as the date of the budget announcement, will raise problems.
He claimed that this budget did not take into account previous instances of not being able to spend the funds. Poudel stated that by offering a high budget, distribution-oriented and popular shows have been added.
He praised the Rs 26 billion budget for COVID infection treatment, prevention, and control, as well as the purchasing of vaccinations.
“For COVID-19, a budget of Rs 26 billion has been set aside. Even if this is acceptable, the government should keep corruption in the acquisition of health supplies and vaccines under control,” Poudel said.
He believes that introducing programs in the upcoming budget that provide free labor but do not build long-term prosperity is unwise. He emphasized the importance of developing employment-generating programs rather than budget-based programs. People with low incomes, according to Poudel, did not benefit from this budget’s tax cuts.
Even this budget, according to Poudel, will not be able to repeal the license system for registering and operating a private company. He claims that as a result, real estate and foreign employment, rather than productive enterprises, have a better chance of flourishing.
Inflation at 6.5 percent is tough to control, according to Dr. Chiranjeevi Nepal.
Former Governor Dr. Chiranjeevi Nepal stated that keeping inflation within government-imposed levels was challenging. He predicted that inflation would rise because the government’s objective of raising Rs 250 billion in internal debt through the budget would put pressure on the external sector.
“Domestic debt of 6% of GDP is intended for raising, but the national debt raising statute states that no more than 5% can be raised,” he explained, adding, “This makes it impossible to keep inflation within the targets.”