The government is constitutionally required to unveil the budget for the coming fiscal year on Jeth 15 (May 29). Yet, not much homework seems to have been done toward that direction. By now, the government of K P Sharma Oli should have unveiled its policy document and the finance minister Bishnu Paudel should have started discussions with political parties. Neither has happened as yet.
There are political and economic sides to the budget this year. From a political perspective, the government shouldn’t ideally come up with a full budget this year because it is not a full-fledged government, it is a caretaker government unless it succeeds to secure a vote of confidence from parliament before May 29. But considering the ever appearing twists and turns in politics, it can be said that the government won’t be able to secure vote of confidence. In this context, the government should focus on general expenditures and expenses to deal with the Covid-19 pandemic.
From the economic perspective, the government hasn’t done proper homework in preparation of the budget. Amidst the pandemic where nearly all the stakeholders are undergoing a shock with cases and deaths rising, the government should focus intensively on the health sector. The government took this obligation very lightly last year. It can only be hoped that things will be different this year.
The budget should also help alleviate the sufferings of lower strata of the economy, the economically displaced people due to the pandemic, small and medium enterprises, transport system, supply chain system etc. The government should gear its efforts to complete the incomplete projects from the past.
When you cannot spend money, how can it generate income and create jobs? How can people benefit? The government should focus on increasing its capital expenditure.
There have been recurrent complaints that the poor people of the society rarely benefit from the budget. This happens mainly because of the incapability of the government to spend. Of the NPR 352 billion allocated for capital expenditure in the budget for 2020/2021, only NPR 126 billion has been spent. The government has money in its coffers but doesn’t have the capacity to spend on projects. Most of its expenses are under general expenditure. And when you cannot spend money, how can it generate income and create jobs? How can people benefit? Thus the government should focus on increasing its capital expenditure.
Another tendency of this government has been to introduce ambitious projects in the budget every year even while many under-construction big projects are yet to be accomplished.
This is going to be the fourth budget of this government. They had come up with huge projects in their manifesto and a similar trend can be seen in the past three budgets as well. The focus now shouldn’t be on introducing new projects but to complete the existing projects that are in the pipeline.
As the country and the people are reeling under Covid-19 pandemic, this is going to be a recovery budget and the budget should focus on providing subsidies and relief measures. The health infrastructure should be extensively revamped. The budget should also incorporate plans to create jobs and increase income. Jobs are created when there is investment, so the government should also have plans to increase its capacity to spend.
There are people and enterprises who have taken small loans, who are also most affected by the pandemic. The budget should focus on providing them subsidies, defer their loans or interests on those loans. The tourism sector, which is a very viable sector for income, has been badly affected. Tourism sector should be prioritized while providing relief packages.
As the country and the people are reeling under Covid-19 pandemic, the budget should focus on providing subsidies and relief measures. Health infrastructure should be extensively revamped.
At the same time, the government should also cut unnecessary expenses. Last year, the budget was around NPR 1474 billion. We don’t need that much amount. NPR 1200 billion would be ideal. For that, the government needs to cut unnecessary expenses. If it can scrap unnecessary and nonfunctional government machineries, that will be a huge relief. Implementation is a key to the success or failure of budget. Problems arise in implementation more because of the lack of political commitment. The government should be committed to showing in actions what it promises in the budget.
Raju Nepal is a former banker and financial analyst. He tweets at @rajunepal (Based on a conversation with Nepal Live Today.)