Federal Budget For Fiscal Year 2020

Federal Budget For Fiscal Year 2020

Siddhi B. Ranjitkar

Finance Minister Dr. Yubraj Khatiwada had done his annual ritual of presenting the federal budget for the FY 2020 to the federal parliament: the joint session of the House of Representatives, and the National Assembly. He revealed that the economic growth of the current FY 2019 would be just 2.3 percent, as projected by the World Bank and the International Monetary Fund (IMF) also but the real growth of the Nepalese economy might be negative. He said that the income of every Nepali had reached US$ 1085, and the purchasing power was US$ 1388 per year for the FY 2019; he did not bother to say whether it was higher or lower than the previous year. He also projected that the economic growth for the next FY 2020 would be seven percent. Most of the economic pundits doubted about it but the growth might be even higher as had been after the devastating earthquakes in 2015 provided the Oli administration would be sincere to the commitments made in the budget to the people.

Every Nepali had anticipated that the finance minister would present a budget for the year in the aftermath of the coronavirus quite different from any previous budgets to stimulate the economy the virus had brought to almost standstill but to the disappointment of all the folks the finance minister had followed the same traditional budget paying only lip service to revive the economy the coronavirus had devastated. In the name of the stimulus packages, the finance minister included the waiver of annual renewal fees, and of the income tax on certain annual incomes in the budget, and the extension of the time for paying interest and loans. For example, anybody having the commercial transaction (turnover) of two million (20 lakh) rupees a year based on the annual statements done for the FY 2018 would have the 75 percent income tax exemption, 2 million to 5 million (50 lakh) would have 50 percent income tax exemption, and 5 million to 10 million (one crore) would have 25 percent income tax exemption. The truth was that even the vegetable vendors selling vegetables on the streets must have the turnover of more than two million rupees a year. A small mo-mo (meat dumpling) restaurant did make the transaction of more than 10 million rupees a year. A bundle of green leaf vegetables cost one hundred rupees in Kathmandu. One plate of mo-mo containing 10 pieces of dumplings cost 150 to 300 rupees depending on the kind of meat and the restaurant anybody visited.

The budget must have addressed a few things to counter the hardship the coronavirus had brought to the country and the people. First, the budget needed to take up the medical services required for tackling the possible outbreak of coronavirus but the budget had only six billion rupees for purchasing the medical supplies. The second thing was millions of folks sheltered in place had already facing hunger elsewhere in the country and abroad and in India, too. The budget needed to have a provision in a massive scale for meeting the resources required for the relief packages to safely bring back home those Nepalese migrant workers from foreign countries, and feed the millions of folks placed shelter-in-place at home or abroad, as the universal law was that if anybody locked up anyone meant needed to feed him or her in the confinement. The third thing was to have a large relief package to salvage the devastated economy.

The finance minister had stated that the budget was socialism-oriented, and chairman of the ruling communist party: Prachanda endorsed it but nowhere in the budget had any sense of social benefits made to anybody except for the social security allowances provided to certain citizens. The budget had been distributive and it had been for putting the money in the pockets of the political leaders and cadres of the ruling communist party rather than putting in the pockets of the poor people and the common folks to stimulate the economy the coronavirus had badly damaged.

For example, the finance minister allocated 11.60 billion to the PM Job-guarantee Program. The finance minister stated that it would create 200,000 jobs. If anybody made a simple arithmetic of it then s/he would find the amount per job would be 58,000 rupees, which was not sufficient for 100 days of employment for a person. The program was supposed to provide at least 100 days of employment to any unemployed person a year. The budget was consumed hiring some people for weeding out the grasses from the compounds of the offices of the local governments at the end of the FY 2018.

The finance minister had boasted that the budget was for creating more than 700,000 jobs. If anybody had read the budget speech s/he would find in the Labor and Employment section that the total number of jobs created would be 734,000 including 200,000 of the PM Job-guarantee Program. The budget stated that the 534,000 jobs would be created by the training programs such as training on plumbing, electric, electronic and so on would created 50,000 jobs at the cost of one billion rupees, and the grant given to the private sector for labor training ensuring two-year job guarantee at cost of another one billion would create another 50,000 jobs, technical and vocational training at the cost of 4.34 billion would be provided to 75,000 trainees, the small farmer credit program the Small Farmer Development Micro-finance would run create additional 40,000 jobs, the Youth Self Employment Program would create 12,000 jobs, the Micro-industry for Poor would create 127,000 jobs, the Forest Product based industry, agro-forest, setting up nurseries, afforestation, herb production and treatment would create 30,000 jobs, the Mobile Fund more than 30,000 Cooperatives had run the Poverty Alleviation Fund had promoted in 64 district would be transformed into the cooperative system would create 150,000 jobs. Actually the private sector creates most of the jobs, the State needs to provide only an environment conducive to create jobs but the finance minister boasted that the budget for the FY 2020 would create more than 700,000 jobs when the country needed millions of jobs to be created for meeting the needs of the youths coming back from the foreign employments in the aftermath of the coronavirus, and the new youths entering the job market.

The finance minister increased the subsidy on fertilizers from nine billion rupees in the current FY 2019 to 11 billion in the next FY 2020. However, every year if anybody had watched the media reports then they would find that farmers across the country always complained that they did not receive the fertilizers at the time of plantation season. They needed to buy the fertilizers at the market prices not the State-supported prices. The support prices of fertilizers were more than three times less than the market prices. Again the media reports had it that the chain of the decision makers in procuring and distributing fertilizers reaped the harvest of the benefits of the subsidized fertilizers as they distributed the fertilizers in conjunction with the local traders at the market. The international community had succeeded in stopping the Nepal Government subsidizing the fertilizers in the past but current senior leader of the ruling communist party: Madhav Kumar Nepal when he came to power reintroduced the subsidy on fertilizers. He allocated two billion rupees for the subsidy on fertilizers; thereafter, the subsidy increased every year currently reaching 11 billion.

One great thing the finance minister did was to allocate 1.82 billion rupees for providing the 1.34 million female students with sanitary pads at schools. They would not need to skip the classes when they had periods. That alone would increase the most needed the girls’ attendance at schools. This was one of the bright spots in the budget. This would help to decrease the gender bias. The school-going women would be strong enough to control their own destiny in the future.

Another bright feature of the budget was that the finance minister allocated 7.52 billion rupees to feeding the day meal to the students of up to the fifth grade so that their attendance at schools would be maintained and even increased even though this amount was considerably less than what really was necessary. The finance minister stated that it would benefit 2.8 million school-going children. With the free textbooks and free meal in the daytime, parents particularly the financially and economically deprived ones would tend to send their children to schools making most of the poverty-stricken children would have at least the fifth grade of schooling.

The finance minister allocated 12.46 billion to set up and upgrade the State hospitals at the center and the provinces and the local level. This amount would build 300-bed separate infectious disease hospital in Kathmandu, add 250 ICU beds at the State hospitals in the Kathmandu Valley and the provincial capitals, and would run 50-bed infectious disease hospitals in all the provincial capitals, and upgrade the Pokhara and Karnali Health academies, and the State hospitals in Koshi, Narayani, Bharatpur, Bheri and Dadeldhura. With this not much amount of money for the State, the finance minister had the ambitious programs to build and upgrade State hospitals.

Following the policy to setting up 5 to 15-bed basic hospitals at all the local levels in order to provide all the citizens with the primary quality healthcare services, 272 such hospitals would be set up at the cost of 14.27 billion in the coming year. This amount of the budget looked like a too conservative estimate for building and equipping 272 hospitals even though the experts might have made the budget estimate. To construct and equip 272 hospitals the State needed much more amount of money than allocated to in the budget.

The notion of one physician at every health institution as stated in the Article 34 of the budget probably would be impossible to implement. Here a physician could be understood as a medical doctor. The idea was excellent to have a doctor at each and every health center or health post. But the two questions the finance minister needed to answer as he presented the budget for such a program. The first question was whether the State had sufficient doctors and resources to put this idea into practice. The second question: the most serious one was whether such physicians would work in such health institutions where even x-ray machines were not available not to mention ultrasound machines and so on, which were the most essential ones for any doctor to work effectively. If the Oli administration was really serious to have a health worker at each and every health post and center, then it needed to produce mid-level health workers previously called health assistance in a large scale.

Ultimately, the finance minister came to the point of completing the Melamchi Drinking water project by the end of the current FY 2019, and start distributing the Melamchi water from the beginning of the next FY 2020. Let us hope it would happen after the failure of meeting the target of completing this highly hyped project so many times in the past. The finance minister stated that he had allocated 5.46 billion to initiate the second phase work of this project, and also allocated 5.89 billion to the management of drinking water and sewer system in the Kathmandu Valley.

Additional 100,000 safe houses would be built in the coming year at the cost of 3.50 billion in order to provide the citizens with safe houses following the policy to replace all the thatched roofed houses in the coming three years, the finance minister declared. This means each house would be built at 35,000 rupees. Could anybody believe that any house could be built at 35,000? It would not be a house but a roofed shed.

The poor finance minister had read out the most contradictory budget, and the most unusual budget anybody had ever seen after Nepal had practiced the annual budget system since 1950s. The folks who had crafted the budget must be very inept or they wanted to make the finance minister looked like incompetent to the public not to mention the lawmakers who had so patiently listened to the finance minister more than an hour on May 28, 2020 when the finance minister read out the 85 pages of the budget for the FY 2020.

Actually, the annual budget was the collection of the budgets the different ministries and the departments under them prepared for every year. In fact every year, all the different departments prepared the budgets for their activities, and then the ministries collected those budgets of their departments, and make the budgets of the ministries. All these budgets and the budgets of other areas not under any ministries put together became the final budget of the federal government. So, some of the statements the departments had made would not be practicable if the finance minister were to check with the concerned technical experts. Similarly, every province had its budget, too. Likewise, the local government altogether more than 700 also had their budgets, too.

The finance minister presented the total budget of Nepalese rupees 1474.64 billion. Of this total budget, 948.94 billion (64.40 percent) was allocated to the general expenditure, 352.91 billion (23.90 percent) to the capital expenditure, and 172.79 billion (11.70 percent) to the financial management. The general expenditure looked so high because it included 36.35 billion subsidy provided to the provinces, and 161.08 billion subsidy to the local governments, and other subsidies so many federal departments provided on various items for example the subsidy on the fertilizer alone was 11 billion for the FY 2020. It was nine billion in the current FY 2019. In addition, the provincial and local governments would have 122.14 billion worth of revenue from the revenue distribution, the budget speech stated. The capital expenditure budget was actually for the construction of road infrastructures, irrigation systems, airports and so on. The road infrastructures alone took one third of the total capital budget. The financial management budget was for providing loans at the discounted interest rate, and the repayment of the interest and principals of the loans the State had taken. More than 68 billion was included in the financial management budget for the FY 2020 for repaying the interest on and principals of the loans taken in the past several years.

The revenue collection for the coming FY 2020 would be 889.62 billion, the foreign grant would be 60.52 billion, and the deficit amount would be 524.50 billion. The foreign loan would be 299.50 billion, and the internal loan would be 225 billion to meet the budget deficit. The deficit amount in percentage was 35.56 percent. The inclusion of 55 billion rupees of the Millennium Challenge Corporation (MCC) in the foreign grant provoked the uproar among the leaders of the ruling communist party, and immediately after finding it, the communist leaders rushed to the Baluwatar residence of the prime minister, and they settled to MCC amount only after the parliamentary action on it as it had been submitted to the House of Representative to pass it. Political intellectuals, and political leaders had been opposing the MCC grant, as it would put the sovereignty of Nepal at risk. What the House would do remains to be seen. Probably, Prime Minister Oli must have been sure to get the MCC grant passed by the House otherwise he would not allow the finance minister to include the MCC amount in the budget.

The budget of the current fiscal year was revised twice bringing down from more than 1500 billion to 1300 billion but the estimated expenditure was only 1073 billion for the current fiscal year 2019 because of the economy the coronavirus had distorted. The coronavirus would take the blame for anybody’s failure in anything. Out of the total expenditure, the general expenditure had been 73.30 percent, the capital expenditure 58.60 percent, and the financial expenditure 78.80 percent. The unbelievably high capital expenditure must have been due to the revision of the budget done twice otherwise the capital expenditure had done poorly. The percentage of capital expenditure would have been even higher if the monsoon construction work would not have been total stalled by the coronavirus.

The finance minister stated in his budget speech that the revenue collection was 827 billion, which was 74.40 percent of the estimated collection of the revenue in the current FY 2019; the revised estimate of the foreign assistance for the current FY 2019 was 153 billion rupees out of which 32 billion was in grant and 121 billion in loan; the estimated internal loan was 193 billion rupees.

In view of the performance of the current fiscal year budget, the new budget for the coming FY 2020 would do any better was doubtful, as the Oli administration had been really in confusion what to do and what not to do in the event of such a pandemic. The Oli administration had really done any substantial things to cope with the coronavirus except for placing everybody shelter in place. If the coronavirus were to continue then the performances of the Oli administration would be really tested for its ability to cope with any such pandemic that challenged any administration elsewhere in the world.

Another laughingstock in the budget had been the commitment made to curb the corruption. In the Article 287, the budget had the statement, “I won’t commit corruption; I won’t let others to commit corruption; I would sincerely work for the country and the people.”  I doubted very much that anybody that had seen the performances of the Oli administration during the last two years would hardly believe in this statement, as the corruption had been endemic in the administration, and it had smeared the ruling communist party and the communists as a whole.

June 1, 2020