Nepalese Budget for Fiscal Year 2008

By Siddhi B. Ranjitkar

Finance Minister Dr. Baburam Bhattarai of the six-party-coalition government presented the first budget of the Federal Democratic Republic of Nepal to the Constituent Assembly on September 19, 2008. It is a revolutionary budget in the sense that it has a large number of people-oriented programs and it is 75% larger than the last year expenditures, 44% larger than the last revised budget and 39% larger than the initial last year’s budget; it would meet the aspirations of the people for development to some extent if the government could seriously implement all the programs mentioned in the budget. The government is developing a three-tiered monitoring mechanism to watch the implementation of the programs.

According to the representative of the Ministry of Finance talking to the Radio Nepal morning program called ‘Antar Sambad’ on September 20, 2008, the total demand for the budget was Rs 243 billion before the formation of the six-party coalition government led by the Maoists; then the demand for the budget surged to Rs 500 billion after the formation of the Maoist-led government; the Finance Minister was for making a reasonably big budget to meet at least some aspirations of the Nepalese people for development; so, the budget of Rs 236 billion was the most realistically done.

Concerning the question of whether the government would be able to implement a large number of programs mentioned in the budget, the representative of the Ministry of Finance said that the government was going to monitor the progress of the programs at three levels: 1) the concerned Minister would review the progress of all programs under the ministry every month, 2) the Finance Minister would review the progress of the programs of all ministries every two months, and  (3) the Prime Minister would review the progress of all programs every four months.

The Finance Minister used to say that the Nepalese economy needed to move at the speed of leaping-frog not at the rate of crawling-snake. The crawling-snake rate might mean the 5% to 6% annual growth of the Gross Domestic Product (GDP); the leaping-frog rate might mean the two-digit growth of the GDP. The Finance Minister had repeatedly said that the Nepalese economy needed to move forward at the rate of two-digit. How many digits the current budget for the fiscal year 2008 (2065) would achieve remained to be seen.

In course of presenting the budget speech, the Finance Minister said that he followed the Common Minimum Program agreed by the political parties in the government in preparing the budget, and the main indicators were not out of the international standard. He said that he included a number of short-term programs and a number of long-term programs that needed to start immediately.

The current budget presented by the Finance Minister is slightly more than Rs 236 billion. Out of this amount, Rs 128 (54.24%) billion is for the regular State expenses, Rs 92 (38.98%) billion for capital expenditures in other words for creating capital assets, and Rs 16 (6.78%) billion for debt-servicing in other words for paying interest on loans and principals to the creditors. More than the half of the total budget goes for running the state machinery, only 38.98% of the budget goes for creating infrastructures and so on, and 6.78% of the budget is for paying back the interest on loans and some portions of the principals.

The Ministry of Finance believed that it would collect Rs 141 (59.75) billions revenue, and would receive Rs 65 (27.54) billion from the foreign aid, and would take the internal loan of Rs 25 (10.59) billion making the deficit of Rs 5 (2.12) billion only. The Finance Ministry would take an overdraft for the deficit amount in other words the Finance Ministry would take out the money from the Nepalese Central Bank called Nepal Rastra Bank without having its deposit.

The Finance Minister said, “landowners do not farm; farmers do not own land; so, the agriculture is undeveloped.” He hinted that the revolutionary land reform in the words of the Maoists was required. He also said that as long as the rural areas could not be integrated with the national economy the Nepalese economy would not grow fast; so he proposed north-south road network, east-west railway line and fast track linking Kathmandu with the terai. He increased the investment in the infrastructures by 77%.

Concerning the industrial growth, the Finance Minister placed emphasis on setting up industries based on the agricultural products, reviving the state-owned sick industries and selling the share of the state-owned industries to the concerned employees. As an incentive to investing in the cement industries, he proposed to link the limestone deposit with the roads. As an incentive to making investment in all sorts of industries, the government would set up a Board of Investment chaired by the Prime Minister to sort out all sorts of problems the private investors would face. The government would set up a National Labor Commission and set minimum wages for laborers and make the invest-friendly laborers, and make the foreign employment honorable. The government would provide the industrialists the public land on a long-term lease for setting up industries.

The government would set the target of bringing one million tourists to Nepal and would develop several trekking areas and celebrate 2011 as a tourism year, improve existing airports and build another international airport, provide the state-owned Nepal Airlines Corporation with the government guarantee for purchasing two large airplanes.

Regarding the problem of the energy deficit, the Finance Minister proposed to build thermal power stations to meet the immediate energy needs and build a large hydropower stations to meet the long-term power requirements. He waived the needs for a license for building up to 3 MW power stations. He proposed to build a pipeline for transporting fossil fuels from India to Amlekhgunj in Nepal. The monopoly of the Nepal Oil Corporation on the supply of petroleum products would end; the government would set up a regulator to adjust the prices of petroleum products to the international prices.

The Finance Minister is for making high investment in education to gradually making free education for all and the education the fundamental rights of the Nepalese people. The Finance Minister said that the public schools had been only for the poor; he also said that the skill-oriented education was the need to minimize the unemployment rate.  So, he proposed the free primary education and the mid-day snacks for the school children.

Similarly, the Finance Minister said that the government was keen to make the health services available to all, and make it the fundamental rights of the Nepalese people. So the government would make heavy investment in the health sector and make free maternity service available at 100 health centers all the time.

The Finance Minister proposed to complete the Melamchi Drinking Water Project in the coming fiver years; and take immediate measures to meet the demand for the drinking water in the Kathmandu Valley. He also said that the ‘slogan of drinking water is a tap at each village household.’

The Finance Minister proposed to provide the youths with Rs 200,000 without collateral for self-employment; this would create 66,000 jobs for the youth.

For making social justice to all, the Finance Minister proposed a flat rise of Rs 2,000 in the salaries of all the State employees. He also proposed to provide the fully disabled people with Rs 1,000 per month, partially disabled with Rs 500 per month, the senior citizens with Rs 500 per month as social security allowances; reduce the age of senior citizens from 70 years of age to 60 for the people living in the Karnali Zone for the eligibility of receiving the social security allowance as their life expectancy was much less than the average national life expectancy; to provide the people belonging to the tribe threatened with extinction Rs 500 per month per person; and to provide the family of a person dead in the political movement with Rs 100,000, and the injured people with relief. The government would issue identity cards to the people living under the poverty line and provide them with goods at fair prices from the 400 cooperative stores to be opened.

The government would pay for up to the Rs 30, 000 loans taken by farmers and the interest on them, and the interest only on Rs 100,00 loans to the banks within 10 years for freeing the farmers from the bank debt.

Under the slogan ‘let us make our village beautiful’, the Finance Minister proposed to provide each Village Development Committee with Rs 1.5 million to Rs 3.0 million for development at each Village Development Area.

The Finance Minister proposed to stop the selling of alcoholic drinks from the stores selling other items and give them two months to return the unsold alcoholic drinks to the wholesalers or the producers; they have to take back those drinks; and set up special stores for selling such drinks only and set the age-limit for the buyers of such drinks.

The government would build a Statue of Republic on the premises of the Naryanhiti National Museum (former palace), would set up a taskforce to find out the assets of the royalties hidden in the foreign countries and expropriate them.

The beauty of the budget was that it did not have effect on the prices of the essential goods as did in the past due to the rise in the tax. The overdraft of the Rs 5 billion that constitutes 2.12% of the total budget would hardly affect the prices of the goods and services rather the prices might come down if the programs would be successful.

The budget was largest of all the budgets the Nepalese people had so far but it was not over ambitious budget as some irresponsible political leaders and opposition leaders said. The programs mentioned in the budget could be implemented and achieve the objectives set in the programs if the government staffs responsible for implementing those programs would be serious and the concerned ministers would work honestly.