With the sole exception of impressive performance on the revenue front, initial symptoms on the other fronts are not very encouraging. Politics, which guides development, is not at all stable.
If the current impasse is not resolved soon, it will be difficult for the government to achieve even a moderate growth of 5.5 percent mainly due to problems on capital expenditure front.
Compared to the allocation (revised estimates) on different heads in the previous budget, the current budget has significantly increased expenditure allocation under each head. Total outlay has gone up by around Rs 72 billion, regular expenditure by Rs 38 billion and capital expenditure by Rs 29 billion. The current budget also expects to exceed the impressive revenue collection of last year, which stood at Rs 142 billion, by 36 billion. Notwithstanding these reasonable looking expenditure figures, it is perplexing that the growth figure is nowhere near last year’s estimate of 7 percent. The FM decided to play safe by fixing the growth rate at 5.5 percent.
Despite the enhanced figures, the FM may have thought that increasing capital expenditure would not be easy – as was the case with the previous government – in the current environment where insecurity and instability abound. While there is no harm in taking into account the existing realities, those involved in the annual task of budget writing should have remembered that nobody is blaming erstwhile FM Dr Baburam Bhattarai for not achieving the pronounced target of 7 percent. Rather, people are appreciative of the unprecedented level of revenue collection achieved under his leadership.
On the revenue front, the previous government had set high standards for others to follow. The government might resort to some statistical acrobatic acts towards the end of the fiscal year such as infusion of capital in ailing public enterprises and substantial increase in amounts used in writing off debts of low income farmers; it is not easy to increase capital expenditure of productive nature in a short span of time. Looking at the deceleration in capital expenditure, some of us wasted no time in cautioning Dr Bhattarai that he should be happy with a growth rate of about half of what he had hoped for in the budget. When then prime minister and finance minister expressed their concern and seriousness to initiate efforts to increase capital expenditure, they also simultaneously realized that they were short of time: Their government was dislodged well before the fiscal year ended.
A prime challenge before the present government, therefore, is to make the best possible use of time, keeping in mind the fact that the time available is limited. Despite timely presentation of budget this time, as opposed to the last time when it was made public after mid-September, if the current impasse is not resolved soon, it will be difficult for the government to achieve even a moderate growth of 5.5 percent mainly due to problems on capital expenditure front.
Despite priority accorded to road construction in the budget, nothing has come from the government as far as the implementation side is concerned. Even the construction of Kathmandu-Tarai Fast Track Road, decided by the previous government to be built under BOOT, is uncertain as nobody knows when the Nepal Army, charged with the responsibility of opening the track, will start the work. When there is so much uncertainty about such projects declared to be of national priority, what will happen to projects in the country’s economically-backward areas?
Also, at a time when public action is called for to moderate inflation (14 percent) and stimulate demand to get the economy out of recession, nothing substantial has happened so far.
In view of soaring prices of essentials and an apprehended shortage of food grains estimated at 132 thousand tons this year, the government is expected to play an effective role through improvement in public distribution system. It may be noted that during crisis, people tend to be more tolerant of state intervention even in liberal economies such as the USA and the UK. Albeit temporarily, governments all over the world become more socialistic and interventionist during crisis. Therefore, resource permitting, our Communist-led government could be as interventionist as is humanly possible to provide relief to the people.
It has also become crystal clear that without minimal consensus amongst major political parties, nothing substantial can be achieved on the economic front, let alone constitution writing and achieving lasting peace. The efforts made by some political parties to keep the Maoists out of power is understandable but an attempt at prolonged isolation of the major political force is bound to be not only counterproductive but disastrous for the economy and the country as a whole.
(Writer is former governor & CA member.)
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