Budget For Fiscal Year of 2019: Magic Or Reality

Budget For Fiscal Year of 2019: Magic Or Reality

Siddhi B. Ranjitkar

Finance Minister Dr. Yubraj Khatiwada completed his duty on presenting the budget for the FY 2019 (2076) at the parliament on May 29, 2019 (Jestha 15, 2076) following the provision made in the Constitution. The budget projected the economic growth at 8.5 percent in the coming fiscal year. Let us see what the finance minister has done to achieve this growth in the next fiscal year.

Last year Dr. Khatiwada as a finance minister had submitted the budget with the economic growth target of 8 percent. At that time the economists had said that it would be challenging to achieve this target. However, the finance minister had said that this growth target would be a foundation for achieving the double-digit economic growth in the coming years.

The economic survey for the FY 2018 means the current fiscal year, Dr. Khatiwada had presented to the lawmakers has three different economic growths for the FY 2018. The IMF (International Monetary Fund) rate is 6.3 percent, then 6.8 percent calculated based on the basic price, and 7 percent on the production price. So, Dr. Khatiwada claimed that the economic growth actually would be 7 percent.

The IMF data on the economic growth presented in the same economic survey are 0.6 percent for FY 2016, 7.9 percent for 2017, 6.3 percent for FY 2018, and 6.5 percent for FY 2019.

The economic growth went down to 0.6 percent in the FY 2016 because of the devastating earthquakes that hit Nepal in April 2015 and caused major damages to houses, and buildings and other structures, and then for months business activities had been almost stopped causing a great loss to the country.

The high economic growth of 7.9 percent in 2017 was entirely due to the high economic activities brought by the reconstruction of the earthquake-damaged structures, and then the growth went down to 6.3 percent because the economic activities had been slowed down mainly due to the unfavorable and incorrect thought about the stock market, and then talking about the productive and non-productive sector and then trying to discourage the investment in the non-productive sector Dr. Khatiwada has conceived. The next fiscal year the economic growth as the IMF projected would be 6.5 percent against the 8.5 percent Dr. Khatiwada has projected in his budget speech.

The economic survey Dr. Khatiwada presented to the lawmakers had stated the income per person is estimated to be NPR 117, 455 (US$ 1,034) for the FY 2018 whereas the budget speech Dr. Khatiwada delivered to the parliament on May 29, 2019 stated that the income per person has reached US$ 1,364. Which one is correct? Dr. Khatiwada needed to tell the public.

The joint election manifesto the two communist parties currently merged into a single one had stated that the income per person would be US$ 5,000 in the next five years. If we take the base year is FY 2018 then this year would have the maximum economic growth 7 percent, and the next fiscal year would have 8.5 percent as Dr. Khatiwada projected in his budget speech. With such a sluggish economic growth the income per person would almost never be US$ 5,000 at least not in the lifetime of Prime Minister Oli and Chairman Prachanda.

Now, let us see how the finance minister is going to achieve the economic growth 8.5 percent in the FY 2019.

Dr. Khatiwada allocated almost NPR 35 billion to the agriculture of which 9 billion is for the subsidy on chemical fertilizers. The large amount of subsidized fertilizers would be distributed through more than 3,000 offices. The distribution of this subsidy had been arbitrary, as only most of the political cadres had been successful to receive the subsidized fertilizers the economists had stated.

The finance minister had allocated billions of rupees to the irrigation, and a large number of irrigation projects and programs about 1,200 in total had been ongoing but only 400 have been working, some experts said. So, only some of the cultivable land had the irrigation facilities the remaining land had to depend on the rain god for good rains during the rice transplantation season.

Also the agricultural extension services the State agencies had been providing had cover only 25 percent of the farmers, and they had the highbred seeds, fertilizers and modern agricultural tools and machines and equipment whereas rest of the farmers had to be on their own for any new technology or seeds or fertilizers.

In such an environment, the finance minister said that the growth in the agriculture sector would be five percent in the current fiscal year in comparison to the 2.8 percent last year. However, he failed to state what would be the growth of the agriculture in the fiscal year 2019.

Then, Dr. Khatiwada has infrastructures, energy, industry (manufacturing and service) and social sector to achieve the 8.5 percent economic growth.

The finance minister allocated NPR 163.22 billion to the infrastructures means roads, railways and sea transport.

The current government had awarded the Kathmandu-Nizgad fast-track highway to the Nepali Army for the construction. The army said that it had cleared the track road however, the detailed project report (DPR) had not been made so far, and it had been submitted to the government but the government had been holding it, the media reports stated.

The government had not been able to run the Janakpur-Jayanagar Railroad that has been done a long time ago for the reasons only the concerned State agencies know. Then, the news has it that certain sections of the East-West Railroads had been done whether it was ground clearing for laying ballast and railway lines not so clear.

The north-south railroads and mid-hill east-west railroads are only on the stage of talking. Feasibility studies have to be done, and then DPRs have to be prepared before implementing the projects. However, Nepalis could do the fieldwork and then make the DPR as in the case of the Kathmandu-Nizgad fast-track highway without any DPR.

Then, the sea-transport of course is a good concept but it might remain in the concept only because Nepal has to make numerous dams to have sufficient water in the rivers to make them navigable. Whether Nepal could mobilize such a large amount of money required for such a venture remains to be seen.

The energy sector of the Nepalese economy must have been doing better. The finance minister’s budget speech must have conveyed the message of having a large number of hydropower projects would be coming on the mainstream in the near future making Nepalis to have sufficient energy for every sector of the economy to develop. So, it received a large chunk of the development budget.

The manufacturing sector has been hopelessly in the bad shape. Cost of setting up a manufacturing unit in Nepal is highest in the South Asia. Then, importing raw materials and exporting the final products are nothing less than nightmares. Then, political cadres coming to collect donations, often short supply of fossil fusil, sudden shutdown of Nepal, and last but not least the trade unions have been the main challenges to the functioning of the manufacturing sector.

Only the service industries such as banking, transport, tourism and aviation in the private sector have been doing well and contributing highly to the economic growth of Nepal. Even then, the government has been trying to control such private service industries that would surely be unable to function properly if the government really does.

The finance minister has allocated a fantastically high amount of money to the social sector including the education and the health.

Senior citizens will have NPR 3,000 per month happily after the lapse of a year despite the current leaders in power while speaking in the election stumps had promised to make it NPR 5,000 immediately after coming to power. Senior citizens completing 70 years of age at least could have NPR 3,000 per month. They could live on this amount depending on where they are. If they were in major cities such as Kathmandu, Pokhara or Biratnagar and Birgunj they could have some teas and snacks every day with that amount.

Then, Dr Khatiwada said that the government would provide school children with the mid-day meal through their mothers. If the money were given to the mothers then the money would end up in the hands of fathers who would probably use the money for booze rather than for the midday meals of the children.

Schoolgirls would probably receive sanitary pads every month during the menstrual periods, as the finance minister had allocated the budget for it. So, schoolgirls would not need to skip the schools during the periods. However, the worst thing the women had been facing the tradition of isolating the women during the periods.

Now, let us talk about the capital budget and expenditure. Dr. Khatiwada in his economic survey made for the FY 2018 said that only 16.7 percent of the capital budget had been used. It meant most of the construction work had not been done if done half-heartedly. Construction contractors most of the time waited for the monsoon rains because it was easier and beneficial for them to work on the rains.

Dr Khatiwada in his budget speech said that he was going to increase the import duty on the daily use food items that could be produced locally. It seemed good because it would encourage the local production. However, the real repercussion of the increasing import duty on those food items would be surely rise in the prices of those items immediately in the market. Then the prices of locally produced those items would also increase.

The finance minister also said that he was reducing the import duty on some raw materials, equipment, machinery and vehicles for some use, and increasing the individual and family income amount for the direct tax waive.

Thus, the finance minister is taking a large amount of money from the pockets of the common folks and putting it in the pockets of some comparatively rich individuals and families, and then the companies, too. Is it how the finance minister is going to build a socialist economy?

Finally, the question is after all the manipulations of the budget figures whether the finance minister would be able to achieve the economic growth of 8.5 percent in the coming fiscal year and whether he would be able to lay the foundation of the double-digit economic growth in the coming years.

If the history of the economic growth is of any guide then the economic growth would be hardly cross over 7 percent not to mention 8.5 percent in the coming fiscal year; it might even be less as the IMF projected unless Dr Khatiwada is a conjuror and he produces a magic wand and makes a double-digit economic growth pure magic, and thus, he makes the Nepalis rich.

May 30, 2019