Deliberations on Nepals Budget for FY 2014/15. This morning I had the wonderful opportunity to speak as an expert at a symposium on Model Budget for FY 2014/15 organized by National Council for Economic and Development Research (NAREC) on Friday Jestha 16, 2071 (May 30, 2014) in Kathmandu. The political leaders, economists, cross section of the society and media persons were present during the occasion. My proposal was to identify and examine the status of economy on the basis of macroeconomic indicators and international comparison. In Nepal growth confined to 3.5 percent; Inflation is hovering around 9.4 percent; Capital expenditure squeezed to Rs. 23 billion out of Rs. 85 billion allocated, which is 27 percent of total capital expenditure as of 9 months data for FY 2013/14; Total exports (Rs. 68.1 billion) is unable to sustain imports of one single petroleum products; trade deficit likely to exceed budget estimated for FY 2013/14. During the same period Nepal imported rice from India equivalent to Rs. 8.8 billion, petroleum products at the level of Rs. 98 billion, vehicles and spare parts equal to Rs. 25.1 billion, and also imported gold and silver to the magnitude of Rs. 29 billion from other countries. Globalization index (165/188), Doing business index (135/186), Global competitive index (125/144), Knowledge economy index (135/145), Corruption perception index (116/177), Human development index (157/186), Gross happiness index (135/156), and Failed state index (27/177) are extremely low as compared with other countries in the world. Although investment/GDP ratio is as high as 32.8 percent, the average growth rate for the last five years is extremely diminutive confined to 3.5 percent. This is attributed to inefficiency, corruption and poor governance. The growth rate for the next FY should be estimated at 5 percent, inflation should limit to 7 percent, fiscal deficit should remain at below 5 percent of GDP and budget deficit within 1 percent of GDP, internal loan should not exceed more than 10 percent of internal resource mobilization, subsidy should be at the level of 2 percent of GDP, and the size of budget should confine to 30 percent of GDP, which is around Rs. 600 billion. The model for economic development should be to attract more FDI and invest more in infrastructure which will ensure a higher growth. FDI will bring not only capital but also technology and also create employment opportunities, and FDI should be utilized in mega-projects to spur growth. Precisely speaking the model is growth with social justice and budget should be formulated accordingly by considering the priority sectors such as hydro-power, tourism, agriculture especially high value crops. This is the era of energy and, therefore, no economic development would be possible without availability of adequate energy. It is necessary to make agreement for trading of 200 MW electricity with India and revive Mahakali-Pancheshwar-Tanakpur Multipurpose project to produce 6,500 MW. There is need to establish fertilizer factory at PPP model, and also replace twines by suspension bridges. Employment is key to development, which would help alleviate poverty and it is the function of private sector to create employment opportunities by establishing export promoting and import substituting small, medium and large-scale industries. And, therefore, it is imperative to provide security to private sector investment and required level of energy to boost-up production in manufacturing sector. Since remittance is the by-product of globalization and liberalization, let it continue with improving quality of human resources and by providing security to workers employed in foreign countries. It is important to make tax structure competitive and government should induct the policy of small government, meritocracy and interdependence while formulating the budget for next FY 2014/15. We must improve our efficiency and competitiveness; Good governance is antidote to corruption; and there must be end of too much politicization.
Posted on: Fri, 30 May 2014 09:36:45 +0000
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