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Budget For FY 2016 (2073) And Its Impact On Economy

Issue June 2016

Budget For FY 2016 (2073) And Its Impact On Economy

Siddhi B Ranjitkar


Finance Minister Vishnu Prasad Poudel presented the annual budget for the fiscal year 2016 (July 16, 2016-July 15, 2017) in the parliament on May 28, 2016 following the provision made in the constitution of Federal Democratic Republic of Nepal. If some of the critical provisions made in the budget speech made available in the pdf file on the website of the Finance Ministry were to enforce then those provisions would make tremendous impact on curbing the corruption and on stopping the shutdowns of highways, regions and even the country would come to an end opening the shining path to the development of the country. For this reason, this budget could be one of the bold steps any government has ever taken. The opposition particularly the NC leaders have bitterly opposed this budget saying it is a welfare budget. Certainly, it is and that is what Nepal needs.


For example, the paragraph 380 of the budget speech has stated that shutdowns of industrial estates, project areas, highways and public areas will be prohibited. Defying this provision if any organization is to enforce the shutdown of those areas causing losses to industries, supply lines and so on then the concerned organization enforcing the shutdown will be made to pay for the losses and damages done.


If the State is able to strictly enforce this provision then surely, shutdowns so prevalent in Nepal will suddenly come to halt. Then, every citizen will not be denied to work and earn livelihood. The economic progress will not be hindered by any abrupt declaration of shutdown of transport or the industrial estates.


Another example is for curbing the so transparent and widely prevalent corruption in the construction projects. The paragraph 389 of the budget speech has stated that the concerned contractor builder will repair and maintain whatever the contractor has constructed for at least five years.


None of the previous governments has thought about it and has dared to include such provision in the past budget speeches. Consequently, common folks could see the newly built roads have huge potholes even less than six months the Department of Roads has certified the construction of the road. No need to say anything about it, as it is self-evident of the highest level of corruption. Such corruption will come to an end if the contractor builder has to maintain and repair such roads for five years.


The budget has projected the economic growth rate at 6.5% whereas the price-rise at 7.5% for the FY 2016. Some so-called economists believe that such high economic growth is not possible against the less than one percent growth in the current fiscal year. They should know the so low economic growth is entirely due to the Indian blockade for more than five months when the economic activities of Nepalese came to halt. Hopefully, this will not happen in the coming fiscal year.


Some other economists believe that the budget is welfare one and most of the money goes to consumption causing price-increase that the economy could hardly hold on. Surely, most of the money distributed to senior citizens, single women, widows, and handicaps, and the 25% salary–increase given to the State employees will go after the daily-need materials causing the increased demand for those materials. It will push the production of those materials; it will contribute to the economic development of the country if those materials are produced internally; if those materials are imported ones then they will increase the State revenue.


Whether the opposition leaders will say the salary increment is the welfare or the necessity. A family of five needs NPR 30,000 to live honorably in Kathmandu; it might not be so expensive in other towns still the State employees need salary boost, as the current lowest paid State employees hardly receive NPR 10,000 whereas the mid employees such as sectional officers received not even NPR 20,000. How could they work without seeking additional incomes to sustain their families?


Senior citizens, single women, and widows have contributed their share in the socio-economic development of the nation. So, other handicaps and they deserve the social security. Even this small amount of the social security allowances given to the senior citizens will positively impact on the population control, as the State-provided social security will dissuade them with having sons as the social security at the old age. Will this open the eyes of the opposition leaders that madly opposed the welfare budget?


The grants given to the village development committees, and to the municipalities are not for consumption. They are for building drinking water systems, tracks and other infrastructures required by villages. Municipalities also will spend those grants on constructing sewerage, roads, drinking water systems and so on. All these things will go for creating capital assets in villages and municipalities that will contribute to the economic development. Is it a distributive budget? The opposition leaders need to think about it.


The budget has allocated NPR 5.33 billions to the Budhigandaki Hydropower project with the capacity of producing 1,200 MW power for initiating its construction in the coming fiscal year. The budget also has made the provision for raising another NPR 7 billions levying NPR 5 per liter on petrol, diesel and aviation fuel for this project. So, practically, the project will have NPR 12 billion in the FY 2016. Thus, the common folks directly contribute to this power project.


The Kathmandu-Nizgad fast track highway received NPR 10 billions for the incoming fiscal year to initiate the construction of this economically so important highway.


Comments: It will directly contribute to the economic efficiency of the country causing time efficient, and fuel efficient transport of goods and services from Kathmandu to Terai and vice versa. The budget also has stated that the State will ease the private company to build the Kathmandu-Hetauda tunnel highway: another economically very important highway. It will shorten the travel distance between Kathmandu and Hetauda considerably.


The agricultural roads called postal roads received NPR 4.20 billions. The money comes from the Indian grants and the Nepalese State revenue.


Comments: It will help to increase the agricultural productions in Terai, as the farmers will have an easy access to the market to sell their products. One of the reasons for the sluggish agricultural development has been the lack of a road access for the farmers to sell their products.


Another highway called Pushpalal Mid-hill Highway received NPR 2.88 billions, and another mid-hill highway: Dharan-Chatra-Gaighat-Katarai-Sindhupalchok-Hetauda NPR 3.02 billions. These highways will contribute significantly to the development of the mid hills.


NPR 2 billions allocated to build the roads connecting the east-west highway with the district headquarters in the Terai, and southern border areas. These roads will further boost the development of the areas to the south of the east-west highway.


NPR 1.86 billions is allocated to the construction of a tunnel at Nag-dhunga of the Prithvi Highway.


Comments: It will contribute to reduce the traffic congestion at this point of entry to Kathmandu. This tunnel will mitigate time, energy and everything lost due to the traffic jam at this point. This ease of traffic will surely contribute to the fast socio-economic development.


The 18 Terai headquarters will receive NPR 500 millions each as the part of the urban development program that received NPR 9 billions for the fiscal year 2016.


Comments: It will contribute to the fast economic development of the Terai due to the injection of money, creation of jobs, and demands for consumable goods and services that will push the productions and supplies that in turn contribute to the economic development.


The budget has allocated NPR 1.72 billions for the people’s housing program to construct 20,000 houses for the needy families belonging to the Muslim, Chepang, Raute, Gandharva, Badi, Bomkari, Surel, Thami, and disappearing communities.


Comments: The opposition leaders could claim this is a welfare budget. It is certainly a welfare budget. It will help to reduce the gap between the haves and have-nots.


The finance minister said, “I have allocated the budget to build 10 urban centers on the Pushpalal Mid-Hill Highway.” He did not say how much.


NPR 1.04 billions is allocated to study on building another 10 urban centers on the postal highways.


Comments: These urban centers will bring the scattered people together at these centers easing to provide them with basic amenities that could not be provided to the scattered families. This is another socio-economic development the budget has foreseen.


The agricultural sector is filed up with the grants and subsides. The budget has stated elsewhere giving 50% to 85% subsidy or grant on purchasing various agricultural inputs, and on constructing various agricultural enterprises such as chilling centers, collecting centers, weekly markets, primary processing centers and so on costing NPR 11.25 billions (NPR 5.78 billions Prime-Minister Agricultural Modernization Project + NPR 5.47 billions fertilizer subsidy) to the State treasury.


Who knows these endeavors will bring any concrete results. However, Finance Minister Poudel has stated that all these projects together will add about NPR 30 billions to the GDP.  How he came to this figure he did not say.


As always the agricultural sector received the significant attention to its development. NPR 5.78 billions is set, aside to the Prime-Minister Agricultural Modernization Project alone without stating the detailed allocations to make self-sufficient in various crops such as vegetables, food grains, potatoes, and fruits.


NPR 5.47 billions is set aside for the subsidy on fertilizers and compost.


Comments: This subsidy alone has been nuisance to providing farmers with fertilizers on the planting seasons, as the cheap and high quality fertilizers quietly flow to elsewhere than to the Nepalese farmers’ fields. Former Prime Minister Madhav Nepal had reinstated the subsidy on fertilizers with two billions.


NPR 8.46 billions is allocated to the livestock development. It will make the country self-sufficient in the eggs in the coming one-year, in meat in the two years, and in milk in three years, the finance minister stated in his budget speech.


The National Forest Development and Management received NPR 630 millions for expanding the scientific forest management program from six districts to 11 districts. And it will increase the production of the fuel wood and will replace the import of fuel wood. It will contribute to develop the renewable energy.


NPR 1.88 billions is allocated to run additional programs of the President-Chure Conservation in 26 districts on implementing the master plan on properly managing and conserving the natural resources in the Chure and Terai-Madhesh areas.


Comments: It will surely stop the deterioration of the Chure forest and contribute to the natural resource development of the Terai-Madhesh areas.


Here comes the community forest that has significantly helped to redevelop the forest lost to the greed of the former dynastic rulers. NPR 380 millions is allocated to the community forest program to expand the “Community Forest, the Poor man’s Asset” to 39 districts. It will help to conserve the forest and environment, and contribute to the livelihood and income-generation of the 60,000 families belonging to 7,000 groups.


Comments: Practically, it will contribute to improve the lives of about 300,000 people assuming each family has five persons.


Comprehensive Terai-Madhesh Special Irrigation Program received NPR 2.30 billions. Eleven districts will have this program in the coming year with the objective of providing 22 districts of the Terai and inner-Madhesh areas with the modern irrigation system, according to the finance minister’s budget speech.


To complete the remaining work on the ongoing major irrigation projects such as Sikta, Rani Jamara Kuleriya, Babai, Bheri-Babai Diversion, Mahakali-III, and the Bagamati within the coming three years, NPR 5.35 billions is allocated.


NPR 3.98 billion is allocated to the people’s embankment program initiated with the people’s participation in the Terai-Madhesh area for expanding to the additional four rivers in the coming fiscal year, and to the systematic river control programs in the twelve large rivers flowing from the high hill areas.


NPR 1.10 billions is allocated to the program on completing the rehabilitation of the freed bonded laborers called Kamaiya in the coming fiscal year, and completing the rehabilitation of the freed another bonded laborers called Haliya in the coming two years, on identifying other bonded laborers called Haruwa Charuwa, and on launching the program on their rehabilitation.


A ‘challenge fund’ with the funding of one billion NPR is initiated for providing the new-business-promoting-industrious youths having the idea of the investment strategy with the investment seed money.


NPR 180 million is added to the “industriousness development fund” for providing the enterprising women with the loans at a low interest rate based on the projects without any collateral.


The finance minister said that he allocated NPR 7.05 billions to run the programs in the industry sector without naming any activity or program.


Comments: Anybody could only guess what activities and program the finance minister had in his mind. What made him not to name those activities and program?


Twenty five percent registration fee will be waived in buying the real estate with the money sent from the Nepalese working in the foreign countries if the buyer submits the certificate of receiving the money through banks.


The State-run trading companies such as National Trading Limited, Nepal Food Corporation, Agricultural Inputs Company Limited, and Timber Corporation of Nepal Limited will be merged into a single company called National Supply Company.


Comments: Proliferation of the State-run business companies had done nothing better than increasing the corruption often distorting the prices and causing the delay in the supply deliveries to grassroots retailers and ultimately to the consumers. Merging those four purchase-and-supply giants into a single company is a bold step to reduce the staff and administrative cost and surely the corruption that had been so endemic in those companies.


Primary education will be made compulsory and free for all. Secondary education will be gradually made compulsory and free. NPR 26.25 billions is set aside for implementing the ‘School Area Development program’ on expanding the access of children to schools, improving the teaching and learning processes, and making the management structure accountable, transparent and strong in the coming fiscal year.


NPR 200 millions is allocated to hold the Seventh South Asian Game in the coming fiscal year. The finance minister also said that he had allocated the budget for holding the Thirteenth South Asian Game in Nepal in 2018 but he did not disclose the amount. Why? Guess it.


To end the possibility of dying without having the medical treatment due to the lack of resources forever, an arrangement has been made to implement the National Health Insurance Plan in a phase-wise manner on making health insurance available to all Nepalese in the coming three years. NPR 2.50 billon is allocated to implement this plan in the 25 districts in the coming fiscal year.


Bir Hospital will be developed in the minimum of five hundred ‘ropanis’ (one ‘ropany’ is 5,625 sq ft) of land in the Kathmandu Valley with the cutting-edge physical infrastructures, equipment and machinery, and the expert services.


Comments: Compete with the private healthcare services at the affordable cost?


Appreciating the social contribution made by the women health service volunteers, NPR 1,500 is added to the dress allowance for them, and health insurance for them is provided.


NPR one billon is allocated to provide the needy people with the free treatment of eight different diseases. Dialysis will be freely provided until the kidney transplantation is done. Service is expanded to identify and treat for the sickle cell Anemia appearing in the Terai-Madhesh area particularly among the people of the Tharu community.


Probably, absence of the medical doctors in villages and in remote areas might end with the two provisions made in the budget: one for producing medical doctors from among the village school graduates providing them with scholarship for completing the MBBS course and then making them work in the concerned village for five years; another provision is made for the medical doctors studying MD and MS with the State’s scholarship need to serve at the remote areas.


Comments: The question is whether the State will be able to provide the required equipment, tools and machinery and medicines for them to practice the newly acquired skills in the health care in rural and remote areas. So far, the State has shamed itself horribly failing in providing the villages and the remote areas with not only the medical staff but also the medicines, too.


Hopefully, the deadline for bringing water from the Melamchi River set for September 2017 will be the final and will firmly be kept, and the residents of the Kathmandu Valley will enjoy drinking (ever-waiting) water from the so famous Melamchi River, and they will soon forget the terrible shortage of water in the valley. The budget allocated to complete the project for the coming fiscal year is NPR 5.98 billions.


The State will give a top priority to the drinking water program on constructing drinking water systems with the people’s participation in the investment in such schemes. NPR 1.63 billions is allocated to urban drinking water projects, drinking water projects to be constructed following the co-investments, and to the drinking water improvement projects.


For the sustainable management and operation of the drinking water systems, NPR 8.03 billions is allocated to expedite the construction of the ongoing 3,000 drinking water projects, and to initiate the construction of additional 2,000 drinking water projects, and for the rehabilitation of 1,600 projects.


The budget has made the provision of NPR 7.22 billions for expediting the construction of the Gautam Buddha International airport, and for making it operational in January 2018, also made the provision of NPR 5 billions for completing the Pokhara Regional International Airport in the coming four years, and also made the provision of NPR 1.50 billions for acquiring the land and delineating the area for the construction of the Nizgad International airport.


NPR 500 millions is allocated to provide so many academies set up in the names of political leaders with the capital grants.


Comments: However, the name of Tanka Prasad Acharya is missed on the list of the academies. Justice is not done to Acharya: one of the fighters that had fought against the autocratic Rana rule, and lost everything in fighting. He survived from the death penalty because of his Brahmin caste. Ranas believed that killing Brahmins and cows was the heinous crime for the Hindus.


The finance minister has said that to further strengthen and make the ‘let us build our villages ourselves’ program effective, grants to Village Development Committees is doubled; NPR 15.55 billions is set aside to this end. Following the provision made in the constitution for developing the Village Development Committees as the local governments, the budget is for increasing the standard of the local administrative structure. Officer-level State employees will be sent to the Village Development Committees for providing services in agriculture, livestock, health and urban development.


Similarly, the finance minister has doubled the grants to municipalities for developing their infrastructures under the program called ‘let us build our municipalities ourselves’; NPR 13.90 billions is allocated to this program.


Altogether NPR 32.64 billions is allocated to the grants to the local agencies.


Comments: some political analysts and economists said that this amount of money could not be used if the local elections were not held and the elected local governments were not in place. So, local elections are prerequisite for the local development.


NPR 32.70 billions is allocated to the social security allowances to senior citizens, single women, widows, handicaps, and the disappearing indigenous ethnic groups. The amount of the allowance is doubled.


Every lawmaker will receive NPR 5 million for developing his/her constituency. NPR 30 millions is set, aside for the infrastructure development of the constituencies through the people’s representatives.


Comments: some former finance ministers including Barshamn Pun of the CPN-Maoist-Center (a new incarnation of UCPN-Maoist) had opposed this budget allocated to lawmakers stating it has done nothing but corruption, and it has shamed the lawmakers.


The less developed sections of the Terai-Madhesh areas will have the ‘Border Area Development Program’ initiated at the southern border-area village development committees. NPR one billion is allocated to make this program effective and expand it in additional 20 districts.


All the 155 zip cars (twines) scattered all over the country will be replaced with suspension bridges by August 2017. To this end, NPR one billion is allocated.


Comments: school children, rural women collecting fodders from the nearest forest, and daily commuters have been commuting on the risky zip cars every day. Some of the commuters have lost their lives falling from the zip cars.


NPR 500 millions is allocated to build motor-able roads reaching all Village Development Committees within the coming two years.


The State will initiate a campaign called ‘Every House, Energy House’ to reduce the dependency on the traditional and imported energy, and to increase the people’s access to the renewable energy. This campaign will be for running ‘light for education program’, ‘solar pumping system for the farmers to irrigate their land program’, ‘one-farmer-one-biogas-plant program’, and ‘rooftop-solar program’. NPR 6.10 billions is allocated to this campaign.


The total budget allocated to all activities and programs is NPR 1,048.92 billions. Of this total amount, NPR 617.16 billions (58.9%) is for running the administration, NPR 311.95 billions (29.7%) for building the capital assets, and NPR 119.81 billions (11.4%) for the fiscal management.


The followings are the sources of resources meeting the budget amount: State revenue will be NPR 565.90 billions (53.95%), repayment receipt NPR 10 billions (0.95), and foreign grants NPR 106.90 billions (10.19), and the deficit NPR 366.12 billions (34.91).


The following sources will meet the deficit of NPR 366.12 billions: foreign loan will be NPR 195.71 billions (53.46%), internal loan NPR 111 billions (30.32%), and savings from the current fiscal year NPR 59.41 billions (16.22%).


NC leaders have been opposing the budget saying this budget is distributive and election-oriented. In response to the criticism of the opposition NC leaders, Prime Minister KP Oli has said that he is sending the resources and authority concentrated at the center to the villages.


NC leaders have obstructed the parliamentary sessions for two days demanding initially the finance minister to resign for leaking the budget to the media and then to set up a committee on probing the budget leak to the media before submitting the parliament. The government has set up a committee. The parliament has started off the deliberations on the budget.


June 1, 2016

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