KATHMANDU, May 24: The government is set to reduce the eligible age to receive an old-age allowance to 65 years from the existing 70 years at a time when the state treasury is feeling the heat of inadequate collection of government revenue.
The government is looking forward to introducing the provision in the next year’s budget speech scheduled for May 29. Currently, a monthly old-age allowance of Rs 4,000 is given to senior citizens who have reached 70 years of age.
The Department of National Identity Card and Vital Registration reports that presently there are around 3.4 million beneficiaries of social security allowances in the country. The government currently spends about Rs 100 billion to provide social security, 20% of its annual revenue. According to the Ministry of Finance, the government would have to bear an additional cost of Rs 30 billion if it implements this decision.
An official at the Ministry of Finance reported that Prime Minister Sher Bahadur Deuba himself instructed the finance minister to prepare a budget reducing the eligible age to receive an old-age allowance to 65 years.
Prior to this, the finance minister of the erstwhile CPN-UML led government increased the old-age allowance by Rs 1000 to Rs 4000 per month to citizens aged 70 years and above. Stakeholders report that the budget for social security has enlarged by nine times while the beneficiaries of the program have doubled within a span of a decade.
Even if such decisions have put pressure on the state’s treasury, political parties continue to use social security benefits as a means to attract voters. While experts have recommended a contribution-based social security program, there seems to be a competition between political parties to increase the old-age allowance in every budget.
Former finance secretary Sishir Kumar Dhungana says that while social security is a responsibility of the government, competition in the distribution of the old-age allowance is inappropriate. He says that it is not suitable for the government to increase recurrent expenditure when the budget for current expenditure is diminishing.
Only 23% of the nation’s budget contributes to capital expenditure; the rest is for recurrent expenditure. Increasing social security would increase recurrent expenditure and decrease capital expenditure. If the internal government revenue cannot support recurrent expenditures, it would have to take foreign loans.
This would increase the country’s external debt which could put the country’s economy in serious trouble. Greece went bankrupt when it had to take foreign loans to make recurrent expenditures.