Jun 7, 2018-The government’s budget for the fiscal year 2018-19 has been criticised for not making a clear policy departure from the past. The notion that comes from Finance Minister Yubaraj Khatiwada is that the government’s fiscal policy should be implementable. The white paper tabled in Parliament on March 30 was a diagnostic report from a finance minister who is also known to be a technocrat. The white paper was applauded for bringing out the actual situation of the country’s continually crippled economy. Although the budget has been presented as a panacea for the ills, it will work only if it is taken seriously by all the stakeholders, public and private.
The implementation of the budget in the future is linked to the idea of economics and law. Improving law enforcement for economic development can be viewed from the prism of whether our society becomes law-abiding. For the law to develop roots and the rule of law to prevail requires ordinary people to believe in the law as economist Kaushik Basu argues in his new book The Republic of Beliefs: A New Approach to Law and Economics. However, such beliefs and meta-beliefs can take a very long to get entrenched in society.
Solon of Athens and Lycurgus of Sparta are often viewed as the ‘founders of Western legal and political thought’. Solon, born in Athens in 638 BC, became the chief magistrate when the city state was in disarray. He played a role in creating one court for all citizens, but more importantly, he paid attention to laws that made economic life possible. The laws encouraged specialisation and exchange, and taking explicit positions on trade, allowed commerce for some commodities but banned it for others. Solon’s counterpart in Sparta, Lycurgus, is often considered to be the founder of the Spartan constitution, the Rhetra. To him are attributed ideas and rules concerning social equality and even wealth redistribution. The trouble with getting into much detail about Lycurgus is that he believed that laws ought not to be written down but held mentally as a code to abide by.
Coming all the way from ancient Greece, countries have, since then, taken the path of formulating economic policies in the form of laws to make economic life functional and prosperous. For example in the US, where laws such as the Sherman Antitrust Act of 1890, Clayton Antitrust Act of 1914 and Robinson-Patman Act of 1936 were endorsed and strictly enforced to regulate market competition and deter collusion. The government’s annual financial plan is, above all, a guiding path towards formulating such laws, which can bring enormous changes in the economic life of society.
The budget for fiscal 2018-19 has laid a foundation for creating numerous laws that are urgently required to bring the economy back on the right track. Finance Minister Khatiwada has explicitly outlined in the budget statement that several laws would be formulated to attract foreign direct investment, encourage public-private partnership to develop small, medium and large scale projects, improve the revenue collection mechanism and completely ban any kind of syndicate in the market.
The budget has also outlined the growth trajectories for the next five to 10 years such as job creation, quality education and health services, and industrialisation. However, the budget has not given much attention to the sentiments of the private sector while highlighting the objective of attracting private investment from both domestic and foreign investors. Additionally, the finance minister did not given much regard to the demand of elected parliamentarians. Such moves of the finance minister were criticised, and so the budget was roundly criticised by members of his own Nepal Communist Party.
Given the sizable electoral mandate, the government’s budget is historic by all means. The expectations were enormous. Clearly, it was not possible to meet all these expectations. Hence, it is time for all political leaders and policymakers including bureaucrats to help the government implement whatever direction the budget has taken. We can’t forget that the economy was messed up as we continued to bring a populist budget each year without giving due attention to the ground realities.
Finance Minister Khatiwada is a combination of Solon and Lycurgus in Nepal at this moment, and the budget he has outlined may not be the best, but we can see that he has come up only with plans and programmes that can be implemented, if tried honestly. Khatiwada has been challenged in Parliament to go to the field and win a village level election for his iron-fisted approach to funnelling money into parliamentarians’ pockets, as he was nominated by Prime Minister KP Sharma Oli. Regardless, the budget speech has shown Khatiwada as Solon-Lycurgus, but what one has to wait and see is how its implementation will unfold within the upcoming fiscal year.
Against this backdrop, it is important to highlight the importance of the requirement of institutions and law enforcers in the country. The critical part is developing institutions and formulating laws that support the implementation of the budget in order to achieve the goals. Finance Minister Khatiwada’s claim that the budget has been designed to help the economy recover largely depends on our state machinery and especially the bureaucracy and its support.
Poudel is an economist
Published: 07-06-2018 07:19