Spend, spend and spend!

Published On: June 2, 2019 02:25 AM NPT By: Republica  | @RepublicaNepal

The government tabled a budget of Rs 1.533 trillion for the upcoming fiscal year 2019/20. This budget seemed to be of distributive in nature due to announcements like raise in hand-outs to elderly citizens, salary hike to government employees and direct funds to lawmakers for development projects in their constituencies. While these distributive and populist programs may please certain groups, it is not the best allocation of the budget. Other than these programs, the budget introduced by Minister for Finance, Yuba Raj Khatiwada, for the upcoming fiscal year 2019/20, is balanced and largely positive. However, he could have done better to rejuvenate the economy through right, effective and efficient allocation of resources for public expenditures.

Finance Minister Khatiwada has not decided to go for very expansionary budget. As most of the ongoing projects and programs have been carried over to the upcoming fiscal year, Finance Minister Khatiwada has set his focus on expediting and completing those projects on time rather than coming up with additional development projects. With that aim, he has allocated adequate budget to those development projects which are of strategic interest, including on transportation, energy and infrastructure. He could have also reduced the recurrent expenditures. Some expected him to slash the unnecessary spending and correct the previous trend of unnecessarily raising current expenditures. However, the current Finance Minister has failed in this regard owing to pressure to bring populist budget. The government has allocated Rs 957.1 billion for the recurrent expenditures. This means 62.4 percent of the total budget will be spent on meeting recurrent expenditures. For the capital expenditures, the government has allocated a total of Rs 408.59 billion, or 26.6 percent of the total budget. The allocation for the capital expenditure is adequate if it is spent on time. However, under-spending of the capital budget has been a persistent problem, and this has been the case in the current fiscal year 2018/19 as well. 

While the government has introduced some measures, including IT-based monitoring of national pride projects from Office of the Prime Minister, signing work performance contract with high-level employee, no transfer of any project chief except in the case that he/she fails to meet 90 percent of performance and hiring project chief through competition outside the bureaucracy, the challenge still lies in the execution of the budget. The Finance Minister has attributed failure in budget spending to drafting laws and regulations and staff adjustment in the new federal set up and he has vowed to boost capital expenditure in the upcoming fiscal year. He will not have any excuse now for the under-spending next year. Another positive part of the budget is that the government has not raised rates of any major tax. This has not only elated the private sector, but it is also expected to help in creating a favorable environment for investments. Having said that, the government will have to  struggle to meet the high revenue target set for the upcoming fiscal year. To make sure that it has adequate resources to finance its expenditures, it needs to initiate reforms in the revenue system, expand tax net and overhaul tax administration.

Leave A Comment