With early elections called for in November, Oli government’s fourth consecutive budget is aimed at appeasing every possible constituency. From young students to teachers, journalists, bureaucrats to elderly folks, there is something for everyone. Full implementation will be a challenge.
Exactly one year ago, the country was going through the first wave of the pandemic, and in lockdown. Considering how it would not be possible for Nepal to dole out stimulus packages as we had been seeing in many other better-off countries, the then Finance Minister had presented a budget that was leaner than the preceding year. The budget for FY 2021/22 stands at 1647.57 billion which is an 11.72% increment from the last one. Provision for capital expenditure for the upcoming FY is the lowest (21.08%) amongst all four of Oli government’s budgets since general elections. Fiscal transfers to sub-national governments have been put under a separate heading from this year which has an obvious declining effect on the recurring expenditure (at 41.19%). On the bright side, this move will enable analyses of the efficiency and efficacy of such fiscal transfers. Total estimated revenue has only slightly increased (2.5%) creating the need for a historic level of debt in absolute terms (Rs. 559.3 billion) to meet the anticipated expenses. Nepal’s debt position has been increasing significantly over the successive years of Oli government, which should be a matter of concern considering our past record, current economic conditions, and most importantly, the fact that it is the future generation that will have to service these debts.
However, history lays witness to the fact that what we see is not always what we get when it comes to our budgets. The government has indeed got itself a number of promises to keep.
Coming back to the budget, it was a very thoughtful gesture from the FinMin to jump straight to health budget. With more than 10% increment on the health budget (and now standing at over 100 billion), we now have quite a sturdy budget to procure medical supplies and vaccines. Compensation schemes and allowances for front-line workers have also been continued. Given the need of the hour, one could argue that this was a much-needed intervention. However, skepticism towards its implementation is warranted, since the budget for the current fiscal year also focused largely on the health sector and its implementation has so far been dismal.
Social security has taken a centre stage despite this being an election government. A 33% increment on social security allowances is definitely going to raise a lot of eyebrows from all political parties and the way political events unfold within the next few weeks to months is going to have a significant bearing on if these promises will hold. In any case, Oli government has touched upon a very sensitive issue and this will definitely promote a culture of populistic politics in the days to come.
With regards to the segregation of fiscal transfers, it is a relief that fiscal transfers have not been affected by the state of federal politics. However, a large part of the fiscal transfers is still in the form of grants which have conditions attached to them thereby creating some form of confusion as to the autonomy of sub-national governments. Furthermore, fiscal transfers in large parts include recurrent expenditure, which could be due to a continuation of previous multi-year projects, but there is also a lingering risk of the inclusion of administrative expenses for projects of federal interest within the fiscal transfers – an issue that has been raised by the provinces time and again.
There are also projects that find continuation in the current budget despite the lack of any visible progress in previous fiscal years. The Prime-Minister’s Employment Program, the Prime-Minister’s Agriculture Modernization Scheme, the apprenticeship program for industries, the focus on special economic zones and industrial corridors are all projects where a significant proportion of the budget has been allocated for the past two fiscal years, yet there is very little progress made across these programs. Their continuation, therefore, is questionable.
On the fiscal federalism front, a couple of very timely promises have been made. Amendments of Local Government Operations Act and Inter-Governmental Fiscal Arrangements Act along with provision for an integrated information system were much needed to maintain fiscal discipline and ensure an efficient operation and reporting mechanism for provincial and local governments. Likewise, there are many other soothing announcements for respective stakeholders under various sectors including agriculture, tourism, industries and start-ups. However, history lays witness to the fact that what we see is not always what we get when it comes to our budgets. The government has indeed got itself a number of promises to keep.