“Cooperatives can never be a substitute for the private sector, which has a vibrant role in the economy. I strongly object to the government programs announced in the budget where a huge money has been allocated to cooperatives to appease cadres of ruling parties,” said former Finance Minister and economist Dr Ram Sharan Mahat. [break]
Speaking at an interaction organised by Society of Economic Journalists-Nepal (SEJON) on Saturday Dr Mahat said applying the concept of cooperatives in every sector would invite problems in their regulation and monitoring. The new budget has authorised Nepal Rastra Bank (NRB) to monitor cooperatives having deposits over Rs 50 million.
Mahat said low capital expenditure and comparatively huge reccurrent expenditure proposed in the budget can´t help achieve 5 percent growth rate target in the fiscal year 2011/12.
“As per the three-year plan, we have to make annual budget worth Rs 381 billion with 20 percent revenue growth to achieve a 5-percent economic growth rate. But this budget can´t achieve 5 percent economic growth given the shortfall in revenue collection and increasing budget size with low capital expenditure,” said Mahat.
The new budget has set a target to collect Rs 241 billion in revenue whereas capital expenditure and recurrent expenditure have been proposed at Rs 72 billion and Rs 266 billion respectively.
“This budget destablizes macro economy and we need a supplementary budget to steer the economy ahead. This budget is unrealistic as it failed to allocate budget to the programs which are high in priority. So, it is not budget speech but speech without budget,” said Mahat. Another economist Dr Biswombher Pyakuryal objected to the government announcement that cooperatives will be monitored by the central bank, which lacks authority to monitor Banks and Financial Institutions (BFIs) in all respects.
“As a board member of NRB, I will write a note of dissent if the board decides to take the responsibility to monitor cooperatives having deposits over Rs 50 million as it is not feasible to monitor thousands of cooperatives with limited resources for their effective monitoring,” said Pyakuryal.
He said the target to contain inflation at 7 percent and achieve 5 percent growth rate can not be achievable, given the mismatch between monetary supply and inflation. Suresh Basnet, president of Nepal Chamber of Commerce, also criticized the government for attempting to minimise the role of private sector in the economy by unnecessarily emphasizing on cooperatives which represent rampant mismanagement.
Economist Dilli Raj Sharma criticized the budget which he said is much focused on appeasing some sections of people rather than programs crucial to economic growth.
17 BFIs seeking refinancing
Dr Bishwombher Pyakuryal, board member of Nepal Rastra Bank, said as many as 17 banks and financial institutions (BFIs) have approached the central bank seeking refinancing to tide over financial troubles. “Total Rs 4.37 billion out of Rs 5 billion worth of refinancing fund of Nepal Rastra Bank, has been provided to different BFIs and 17 more are seeking refinancing to deal with liquidity crisis,” said Pyakuryal.
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