With the Finance Ministry working on the new budget, Finance Secretary Yubaraj Bhusal has a busy schedule these days. Prithvi Man Shrestha of the Post caught up with Bhusal to talk about the annual financial plan, its priorities and policies. Excerpts:

The Finance Ministry has been working on an early budget this year. How is the budget preparation moving forward? Will the budget size remain within the ceiling set by the National Planning Commission?

After completing discussions at the National Planning Commission (NPC), we are now close to completing discussions at the Finance Ministry level. Our plan is to wrap up the budget discussion at the ministry on Friday. The ceiling given by the NPC is Rs 596 billion. The size may fluctuate by Rs 2-4 billion which is natural in every budget making process.

As this budget will be the first one following the second Constituent Assembly election, expectations are high. What will be the specialty of the new budget?

The budget won’t be populist but realistic. It has been prepared based on the approach paper of the 13th Interim Plan which aims to graduate the country to developing country status from the current level of least developed country. The common minimum programme (CMP) has also been taken into consideration in the budget making process. The main priority of the government will be energy and hydropower development in particular.

The government will create an investment environment for increased investment from others by aiding domestic and foreign investors through modalities like public-private partnership and public-private-people partnership. The second priority is other infrastructure such as road, irrigation and river control initiatives.  

The third priority is the agriculture sector. Under the agriculture sector, increasing production, expansion and mechanization of farming as guided by the Agriculture Development Strategy (ADS) and making available improved seeds and animal feed to farmers will be the measures taken.

Will the government also increase investments in the energy sector?

The government does not have massive resources to invest in the energy sector as it consumes huge capital. However, there won’t be a resource gap in national pride projects like the Upper Tamakoshi Hydropower Project. We are also initiating projects like Nausyalgad, Rahughat, Budhi Gandaki, Maiwa Khola and Madi Khola. Given the limited resources of the government, our biggest focus will be creating a conductive investment environment. China Construction Bank, Exim Bank and European Investment Bank are ready to invest in the sector.

What will be the distinctly new policies in the new budget?

As land acquisition for various development projects including transmission lines has been problematic, we are preparing to introduce a policy under which land will be evaluated the same way for all purposes. The government will compensate owners for the land acquired at the market price and tax will also be imposed based on the market price. The value will be the same for the private sector, general public and banks. The government has reached a conclusion on introducing this policy and we are arranging the necessary process for this. The budget will announce this policy and the necessary arrangements will be made to amend a few laws to implement this policy.

This year’s budget will be coming almost a month earlier than usual. But there are still questions about the implementation aspect. Will the new budget address this issue too?

We are going to amend Public Procurement Act which is expected to address the implementation problem due to procurement related problems. The new act will also address the problems being faced by Nepali missions abroad regarding purchasing land and selling their assets. The current PPA has not envisioned that there will be government offices outside Nepal. If the Nepal Embassy has to sell a car, it cannot follow the PPA. This is an issue to be addressed by the law rather than the budget. We are drafting a Fiscal Responsibility Act which envisions institutionalizing the existing system and simplifying the process of budget implementation.

The Finance Minister has been talking about second generation reforms. Will the budget announce some measures on them?

There will be a policy statement in the budget. The second generation reform measures are basically related to removing obstructions and simplifying the process. Particularly, legal and governance reforms will be major components of these reforms.

Will the budget increase the salary of government employees?

This time, no salary rise will be announced, but unnecessary allowances will be cut.

The Office of the Auditor General has been critical of the massive tax exemptions and cuts arguing that such incentives have not been beneficial for the country. Will there be a review of the tax exemptions in the new budget?

As far as tax exemption is concerned, we are going to review it. We have received a report regarding the subject.  

Will the budget take any new initiative to increase tax collection?

It is too early to talk about the tax regime as it is something we keep secret and decide at the last moment. We will definitely take measures to expand the tax net. For example, there might be a provision that all salary holders must obtain a PAN card to be eligible to receive their pay.

We have to create a strong revenue base considering that we are aiming to graduate the country to developing country status from the current position of least developed country.