On the back of ebbing investor confidence and slowing economic activities in the absence of clear economic policy and financial resources, the government on Tuesday announced a full budget worth Rs 404.82 billion for the current fiscal year through an appropriation ordinance. The technocratic government, which has the main mandate of holding the long-overdue Constituent Assembly (CA) polls, has made some effort to rejuvenate the confidence of the business and donor communities who have been expressing concern over poor spending of development budget.
During the first seven months of the current fiscal year, the government had spent around 25 percent (or Rs 13.42 billion) of the total Rs 51 billion set aside for capital expenditure. This budget has tried to address some key demands of the business community, including industrial security and export incentives, although it has very little to offer to the common man. But this third ordinance budget in a year has made some effort, albeit a little late, to restore depleting business confidence.
Though the budget has not altered revenue policies and tax rates, it has raised the hope that the slow pace of capital spending will pick up momentum in coming days with additional budget going into national pride projects. At a time of ballooning trade deficit, slow remittance growth, growing current account deficit, declining balance of payment, slowing industrial growth and declined farm outputs, the government’s efforts to address these challenges (as expressed in the new budget) are still insufficient.
The three-month implementation period for the announced programs is definitely inadequate. In keeping with the trend, huge allocation has been made for current expenditure and the portion of capital expenditure is very low. The current full-size budget has allocated Rs. 279.01 billion (68.92 percent of the total budget) for recurrent expenditure, Rs 66.13 billion (16.34 percent) for capital expenditure and Rs 59.67 billion (14.74 percent) for financing provisions.
Low capital expenditure means less economic activities, which eventually slow down economic growth. The government has projected economic growth of 3.6 percent for the current fiscal year, which is lower that the previously estimated 5.5 percent. Though this budget has continued with most of the programs brought out by the previous government, it has allocated an additional Rs 52.89 billion for the proposed election and high priority projects.
Amidst the county’s dwindling supply capacity in international trade, the budget offers Rs 300 million for export promotion and Rs 20 million to initiate process of introduction of ‘One District, One Product’ program in 10 districts. Subsidy in insurance premium, insurance of fish, poultry and crops and operationalizing Special Economic Zone in Bhairawa within this fiscal year are also welcome steps.
This budget’s focus on Priority One (P1) projects has not only raised people’s hopes on the implementation of such crucial projects, but could also increase investor and donor confidence. However, budgetary allocation and announcement of new programs won’t have the desired result without collective political will. Moreover, concrete strategies are needed to restore industrial growth, boost farm production, ensure smooth implementation of infrastructure projects and to rein in skyrocketing trade deficit. Although the CJ-led government’s prime responsibility remains holding free and fair election of Constituent Assembly (CA), it cannot afford to ignore the gathering storms around the economy. Nor can its political backers.
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