Game of lies and deceit

The political parties have started distributing freebies to attract voters and secure their seats. Taxpayers are going to have to bear the costs. The government’s capital budget is going to take a huge toll.

File photo/UNDP

Anjila Shrestha

  • Read Time 4 min.

With the local election dates approaching, there has been a simultaneous rise of optimism and cynicism in the air. The citizens have been feeling queasy about the intent of the parties and individuals who are campaigning to run for office. The public has enough past experiences where unfortunately the bold promises that lead to the election of a new government have never been upheld, time and time again. 

Economy in mess 

A government should be accountable and transparent towards its citizens on every policy it makes and implements but this rarely is the case in Nepal. The recent “temporary” ban on the import of luxurious goods can be taken as a perfect example to lend weight to this claim. The ban includes at least ten non-essential “luxurious” goods like fast-moving consumer goods (FMCG): Lay’s chips, Kurkure, cheeseballs, playing cards, motorcycles, vehicles, televisions, cellular telephones, cigarettes, alcoholic beverages, kids’ toys, and other similar items. This drastic step was reportedly taken by the government to tackle the dwindling FOREX reserves. According to Nepal Rastra Bank, Nepal’s gross forex reserves had decreased by 17 percent to USD 9.75 billion in February 2022 from USD 11.75 billion in mid-July 2021 which is only sufficient to support less than six months of imports.

To address the current situation, the cabinet recently informed the public that the government offices will now have consecutive two public holidays a week (Saturday and Sunday). This move was taken after the recommendation from the Ministry of Finance to the Council of Ministers to curb the rising fuel consumption. Petroleum products alone accounted for 14 percent of the country’s total import bill according to the Trade and Exportation Promotion Centre. The petroleum import bill as of the first eight months of the current fiscal year reached Rs184.98 billion ($8.2 million a day on fuel alone) making oil the country’s largest import.

But the public is still largely in the dark as to why such drastic measures are being taken. This three-month-long ban on the above-listed goods will obviously have a negative impact on the revenue generation of the state, as these imports and the resources they generate were taken into account while drafting the budget for the next current year. It can be estimated that the revenue of three months generated from the banned goods will be roughly Rs 15 billion. To put things in perspective, Rs 15 billion is roughly 12.3 percent of the budget allocated for the health sector in FY 2078/79 BS. Although temporarily banned goods like vehicles and electronic goods can be technically pent up and can be imported after the upliftment of the ban, the FMCG goods which are recurring will not. This revenue will be lost and we will not recover them. The government has not yet explained this disruption. Nor has it provided any clarification on how it will recover from a loss of a huge chunk of its future revenue as there is no guarantee that the substitute goods available in the country will replace the consumption of such FMCG goods. And in this turbulent economic environment, we cannot risk losing the government’s income source (leave Sri Lanka as a cautionary tale). 

Country in turmoil 

With elections in sight, the political parties have started distributing freebies to attract voters and secure their seats in the upcoming elections. There is a reason why Milton Friedman was so adamant about “there is no such thing as Free Lunch.” Someone is going to have to bear the costs, which is either the state itself which eventually means the burden goes to the taxpayers. And when the country is in turmoil, the government’s capital budget is going to take a huge toll by giving away such freebies for “free”. 

With tax offices failing to meet the collection target by Rs 32 billion as of the third quarter of the current fiscal year, the revenue collection is not ideal. On top of that, the government is grappling to sustain the recurrent expenditure with its own resources, hence relying on loans to meet the resource deficit to fund budgetary programs. 

The Central Bureau of Statistics projects a 5.84 percent economic growth. The public is yet again left in the dark as the government fails to explain the reasoning behind such projection of economic growth rate.

The introduction of such protective measures at the time of the election led to the Finance Minister suspending the Governor of the Nepal Rastra Bank from his office. The Supreme Court did reinstate the governor but this shows how turbulent the government is. The finance minister was facing criticism for failing to prevent the economic crisis facing the country but he was busy arbitrarily removing the governor from his post and toying with the autonomy of the Central Bank. When the Ministry of Finance and Central Bank must be working together to save the country from an economic crisis and reassure the public that everything is under control, they instead waged a war amongst themselves just adding fuel to the fire, instead of fulfilling their constitutional and legal responsibility of strengthening the country’s economy.

On top of everything else, amongst this tumultuous economy, the Central Bureau of Statistics published a preliminary report which projected a 5.84 percent economic growth rate in the current F/Y without explaining how it would happen. The public is yet again left in the dark, as the government fails to explain the reasoning behind such a staggering increase in the projection of economic growth rate. Meanwhile, the World Bank and Asian Development Bank have projected the economy to grow by 3.7 percent and 3.9 percent respectively. Even laypersons can understand that an almost six percent growth rate in this economic crisis is simply not possible. Economist Bishwambher Pyakuryal stated this “as face-saving data ahead of the election” and an “artificially designed data”. He further stated that “the economy is depressed…stringent measures have been imposed to curb imports, bank lending is slow and investment is weak, and the government is stopping children from going to school, traders from doing business, and government employees from going to full duty to save fuel.” Experts have a hard time believing this superficial and overly presumptuous number is achievable. With the elections coming up, the game of lies, deceit, and concealment has already begun, or rather it has never stopped. 

Anjila Shrestha works as a Researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. 

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