Comments on the Budget for FY 2008 (2065)

By Siddhi B. Ranjitkar

First of all, the budget delivered by the Finance Minister of the six-party coalition government is for the fiscal year 2008 (2065); fiscal year is not a calendar year so it covers three months of the next year, too; it is understandable to all; so, it is not necessary to show the two calendar years for a single fiscal year, as it is confusing to even Nepalis not to mention the foreigners when we write two calendar years for a single fiscal year. Builders of a New Nepal need to use the new way of mentioning and writing a fiscal year discarding the confusing old style of mentioning a fiscal year. So, let us talk about the fiscal year 2008 not 2008/09.

Maoist Finance Minister Dr. Baburam Bhattarai delivered the budget speech to the Constituent Assembly-legislature on September 19, 2008. Members of the Constituent Assembly debated about the budget for three days starting on September 21 and ending on September 23. Then, the Finance Minister replied the questions of the members of the Constituent Assembly on September 24, 2008, and agreed to include some suggestions put forward by the members of the Constituent Assembly thus breaking the tradition of not changing anything in the budget presented by a Finance Minister. Then, Finance Minister Dr Bhattarai also presented Appropriation Bill of 2008, Advance Expenditure Bill of 2008 and National Borrowing Bill of 2008 at the Constituent Assembly. The Constituent Assembly passed the Advance Expenditure Bill of 2008 unanimously.

Naturally, die-hard opposition members except for a few rational thinking members of the Constituent Assembly criticized the budget as a highly ambitious budget and both the collection of revenues and spending the collected revenues would not be possible; they even went to the extent of saying that it would cause destruction of the Nepalese economy. It is an extreme criticism some opposition members have done while some others opposition members simply said that the high spending would cause inflation and price rise.

In fact, the opposition members in the Constituent Assembly would be correct if they are running the administration. They certainly would not be able to implement such a large budget, as they would continue their own style of working to enrich themselves and their relatives while keeping the majority of people in poverty. We have seen the misuse, misappropriation and corruption during the thirty-year Panchayat regime and then the worst possible corruption during the fifteen years of the Nepali Congress rule. We also have seen how the government led by Prime Minister Girija Prasad Koirala had made the shortage of petroleum products during the interim period of the last two years causing an immense loss to the economy and to the people not to mention the inconvenience and time loss caused by the need for the motorists and motor bike riders to line up for hours even days for filling up their gas tanks at the gas stations.

Nepalis could not enjoy the fast economic development because of the rent-seeking mechanism the ministers of the government led by Girija Prasad Koirala had designed and implemented. For example, the government could have built the fast track road linking Kathmandu with the terai area in early 1990s if the ministers of the Girija administration were not seeking a rent for every decision they made. Another example is that the Girija administration sold two brand new airplanes of the State-owned then-Royal Nepal Airlines Corporation and took two old planes in lease making the transparency of the commission business. However, the current Finance Minister has said that the government would provide the Nepal Airlines Corporation with the guarantee to buy two large airplanes, and build a fast rack linking Kathmandu with the terai under the contract of the BOOT (Build Own Operate and Transfer). If the current ministers of the six-party coalition government would not be seeking a rent for anything they do then the implementation of the budget for the fiscal year 2008 would not be difficult.

The combination of Former Prime Minister Girija Prasad Koirala and former Finance Minister Dr. Ram Sharan Mahat was very good in the past for destroying the state-owned industries. For example, they destroyed the service industries such as Sajha Yatayat and the Kathmandu Trolley bus, manufacturing industries such as Birgunj Sugar Factory, Birgunj Agricultural Factory and Hetauda Textile Factory and so on, and dissolved many consulting services in the name of privatization for flourishing the companies owned by their relatives and friends.

The current Finance Minister has allocated certain budget for reviving some of those industries particularly the Birgunj Agricultural tools Factory, Birgunj Sugar Factory and Hetauda Textile Factory. The Finance Minister in his budget speech said that once the management could run these factories smoothly, the government would sell their shares to the employees working at their respective factories. If this thing works well then it would be beneficial to the employees working at these industries and to the Nepalis in general.

After listening to the control over the revenue leakage and the parallel market in other words smuggling of goods in the budget speech, some businesspeople have been nervous. So, some of them have expressed their concern over the state-control over the private business; this is the veiled nervousness they have shown. If we take a look at the history of the Federation of Nepal Chambers of Commerce and Industry (FNCCI), its members had once launched a street protest against the State-taking actions against the bank-loan defaulters; the government had once issued an arrest warrant to the former president of the FNCCI for evading tax and so on.

So, the current Finance Minister needs to take bold actions against tax defaulters and loan defaulters if he wants to make his budget a success. Former Finance Minister Dr. Ram Sharan Mahat had covered up the loan defaulters and even attempted to save former Governor of Nepal Rastra Bank (Central Bank of Nepal), Bijaya Nath Bhattarai charged by the Commission on Investigation into Abuse of Authority with corruption saying that the Bank would not function properly without him. If such things continue in the coming months then the current budget would certainly fail.

The State-control over certain things is necessary to regulate the economy. We cannot depend entirely on the private sector only, as the rules and regulations that would make the private business competitive and that would not let the businesspeople and industrialists break the business ethic with impunity have not been in place. The private monopoly is worse than the State monopoly on anything. In addition, even the so-called highly developed countries have the State-control mechanism to stabilize prices and even economy. They control at lease 10% of the total supply of services and goods to stabilize the prices according to the experts. The government injects money to the banks to save them from bankruptcies. For example, recently, the US government is providing $ 700 billions to save some of the banks from bankrupting in the US.

The opposition members of the Constituent Assembly said that the current budget would cause high inflation. However, they refused to note that the budget deficit was only Rs 5 billion out of the Rs 236 billion budget. Such a small budget deficit would have hardly any effect on the inflation. The current inflation in India is the main reason for the inflation in Nepal, as India exports not only its goods and services to Nepal but also inflation and other economic benefits and ills, too. Nepalese economy is just like a housefly sitting on the back of an elephant and flying at any directions it likes but moving to the direction wherever the elephant moves on.

Some so-called economists believe that the current budget would inject huge cash in the rural areas causing inflation and price rise. The Finance Minister has increased the Social Security Allowance to senior citizens to Rs 500 per month, and allocated Rs 1.5 million to Rs 3.0 million to each Village Development Committee for local development. This cash injection would certainly cause certain demands for local goods and services as well as the imported goods. However, that would not cause inflation as much as the criticizing economists have foreseen but would fuel businesses and manufacturing, as people start buying more goods and services from the additional cash they have in their hands. We cannot expect growth of businesses and industries without people buying the goods and services.

Some commentators doubt about the possibility of effectively implementing the programs mentioned in the budget. For example, making all Nepalis literate in two years seems to be highly ambitious program. It is a challenging task if not impossible for any government of the past. However, the current Minster for Education has said publicly that the government is mobilizing 35,000 volunteers for running literacy classes for making the illiterate people within two years. The Finance Minister has said in his budget speech that the government would appoint one volunteer to each ward of the Village Development Area. If everything goes as the ministers have said then the programs mentioned in the budget speech would surely work.

The Finance Minister proposed to impose 5% surcharge on the tuition fees paid by the students at private schools and use that money for the poor students in the remote areas. This is one way of distributing wealth to the poor. He also proposed to impose 0.5% surcharge on the tax of selling land in Kathmandu and use that money for improving the holy river called Bagmati River. These are a few practicable things the Finance Minister proposed to do.

The Finance Minister has allocated certain money in the program that has created controversy. For example, the Finance Minister has allocated Rs 2.5 million for celebrating the centenary of the great poet called Laxmi Prasad Devkota. Most of the people belonging to the ethnic groups questioned why the Finance Minister allocated so much of taxpayers’ money to celebrating the centenary of the poet of Khas (Nepali) language whereas he forgot the poets of other ethnic groups as great poet as Devkota. This is a waste as well as unreasonably allocated money to a single poet of a single language. The Maoist Finance Minister needs to correct it if he thinks that he is for making an inclusive society.

The Finance Minister is moving fast calling the secretaries to various ministries to his office and telling them to work following the calendar of operation to make his budget and programs a success. Similarly, other ministers also have been moving fast to implement the programs and the budget of the six-party coalition government. If these activities of the ministers are the indicators of seriously functioning of the current government, no matter what the opposition members of the Constituent Assembly and the so-called experts have said about the budget, we could anticipate positive results of the budget and programs presented by the Finance Minister.