Promising start

  • The new reform-oriented budget shows that the Finance Minister has done his homework
- Surya B. Prasai
Promising start

Jul 17, 2014-

Finance Minister Ram Sharan Mahat presented the Nepal government’s budget for 2014-2015 on Monday, marking a critical juncture in Nepali democratic politics. This budget marks the formation of the Constituent Assembly and is attuned to Nepal’s governance challenges in a transitional state mechanism.  

Calls to make the current budget proactive, democratically sustainable and growth oriented had come from many quarters, including giant business corporations, which are increasingly influencing Nepali politics. Focus was sought on reforms and expansion of the education, energy, infrastructure, agriculture and irrigation sectors. Nepal’s trade policy too needed a total revamp, given the changed geo-strategic context of a possible free trade zone between India and China.  

Reform-oriented

The current budget, which caps at nearly Rs 618 billion, is Mahat’s seventh presentation as Finance Minister under various governments. The budget’s positive side is that it is reform-oriented, focussing on a national re-hatch of infrastructure and agriculture sectors in particular. Education has received the largest allocation of nearly Rs 86 billion. Although many lawmakers had demanded Rs 50 million for each individual constituency as a development fund, given the public ire on such funds being misused in the past, Mahat proposed the middle way of a regulatory path with some seed money that can be monitored and evaluated so as not to hurt the current coalition government’s all-party outlook, as demanded by Prime Minister Sushil Koirala.    

The synoptic highlights of this budget are the expansion of the ‘one village, one product’ programme; interest exemption on loans for small to medium-scale entrepreneurs who pool their land for farming; the People’s Embankment Programme for two major rivers; a 20-year agricultural awakening strategy; expansion of the Kathmandu Ring Road and arterial feeds with  Chinese assistance; two more transmission lines between Nepal and India to increase power flows; the possibility of a Tax Clearance Commission; the expected allocation of Rs 50 billion to the Ministry of Federal Affairs and Local Development; and though not openly mooted, rapid construction of the Gautam Buddha International Airport. The energy sector will be getting only Rs 28 billion this year, down Rs 2 billion from last year, while the Ministry of Agriculture will be getting Rs 22 billion. However, the government needs to be serious about its ‘Decade of Agriculture Revolution’, for which irrigation demands a major push.

The good and the bad

Mahat stressed his ‘second generation reforms’ to strengthen regulatory frameworks for new policies in the financial, foreign exchange, investment promotion, industry and hydropower sectors. However, stronger emphasis is required on infrastructure, namely increasing transportation mobility and developing Nepal’s own strategic oil reserves. The Kathmandu-Tarai fast track road, though harped on incessantly by past governments, must now take shape. It is not as expensive as envisaged and all government investment could be recouped in a few years if the road is converted into a toll-paying highway.   

It is also encouraging to note that the current government will announce 50 new municipalities with the recent upgrade of 72 Nepali townships to municipal areas. However, some media critics have charged that the government has not shown inclusiveness in doling out allocations to various municipal areas that have already been named. And there is one itinerant complaint that nearly Rs 455 billion is being allocated for the salaries of civil servants and Nepal’s security forces in comparison to just Rs 141 billion for development works.

On the downside, the government has yet to come up with firm steps to check artificial price hikes on essential grain commodities, especially now that Nepal has built a substantial food grain stockpile. Non-Resident Nepali investment has also not been given the priority it deserves, particularly in the tourism, housing and transport sectors despite Non-Resident Nepali Association President Shesh Ghale’s global push for such reforms.   

During the 2014-2105 period, middle class Nepalis would like to see a lower inflation rate, equitable access to educational resources, free flow of drinking water and good quality affordable housing. These are all challenges for the government in the short and long term since it counted on middle class votes in the recent elections and promised them all the aforementioned.   

Looking ahead

Similarly, the completion of current and existing hydropower projects will largely determine the current government’s infrastructure rebuild. Businesspersons and entrepreneurs from Beijing to New Delhi are eagerly waiting to invest in Nepal’s economic growth, which could trigger faster regional production bases geared towards a more global market. In fact, the World Bank  recently mentioned that Nepal had to move up to 11.75 percent from the current 8.24 percent infrastructure development in the national GDP if it was going to meet its economic growth projection. On the other hand, the government is talking of decreasing donor involvement in Nepali development, though past records have shown that increased investment and involvement in various Nepali development plans have been donor-led.

The 2014-2015 budget is different from previous ones, which were often termed ‘old wine in a new bottle’. The 2014-2015 budget is indeed new wine with ‘democratic reform flavours’, coming across strongly in a technical scenario. But in the larger political context of strengthening South Asia’s democratic resurgence, it must also provide synchronous solutions to resolving the lingering remnants of Nepal’s civil conflict through peace and reconciliation challenges, leading to a more permanent berth for Nepal’s internationally observed peace process and democratic governance system. Mahat’s budget could be termed a democratically attuned reform-oriented budget in short; he has done his homework well.

Prasai is a strategic communications and international development analyst

Published: 18-07-2014 08:58

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