Budget delay will hit service delivery, says finance ministry
KATHMANDU, Nov 2: Basic health care facilities and delivery of other public services would go haywire if the country does not get a fresh budget within the next 15 days, the Ministry of Finance (MoF) has warned.
“Such a situation looms large because we are already facing a net fund deficit of Rs 7.42 billion for the fourth month (of 2012/13), which ends on mid-November. If new budgetary arrangements are not made, situation may turn worse,” said Finance Secretary Shanta Raj Subedi.
If the new budget does not immediately replace the existing one-third budget, MoF says it will not be able arrange funds for the payment of the salaries of the Nepal Army, Armed Police Force, Nepal Police, health care staff and teachers, among others. “We will also lack funds for medicines that are distributed among the poor for free or provide scholarships to the students, among others,” said Subedi.
The fund crunch surfaced mainly because under the prevailing one-third budget, the government can spend only Rs 75.92 billion till Kartik-end (that is mid-November, 2012). However, its liability for the period crosses Rs 82.84 billion.
Though the government has treasury surplus of over Rs 32 billion, the government can not use it owing to the legal provision associated with one-third budget. It has an option to draw overdraft of around Rs 12 billion, but the MoF has not preferred to use it yet.
“A serious fiscal imbalance has cropped up and it will impact all Nepalis alike,” said Subedi. He has urged all the political leaders to come to an understanding for bringing the full budget at the earliest.
Subedi was speaking at a function organized at the Prime Minister´s Office. “Not just the social front, the lack of full budget has also eaten away economic dynamism, hurting creation of jobs and income opportunities at home,” said Subedi.
Owing to partial budget, officials said the development budget has remained largely unused as concerned executing agencies failed to tender out the development works. It even affected implementation of national priority projects like Mid-Hills Highway, Kathmandu-Tarai Fast Track, Banepa-Sindhuli Highway, irrigation projects and expansion of roads in the Kathmandu Valley.
“Fund crunch emanating from one-third budget has even made us incapable of arranging counterpart funds for securing foreign aid. This has affected the flow of foreign aid as well,” said Subedi.
Moreover, lack of clear fiscal policy has pushed the private sector and foreign investors into uncertainties, thereby affecting flow of investment, industrial expansion and job creation, said Suraj Vaidya, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
“The government is not just a motivator but also the biggest consumer. Sadly, its weak spending has led to a decline in demand in the market,” Vaidya said.
Vaidya along with Narendra Basnet of Confederation of Nepalese Industries (CNI), among other private sector representatives, urged the government to immediately forge cosensus on full-fledged budget.
“Budget is the lifeline of a country. Hence, we urge all the political parties not to do politicize the issue of budget,” they said.
Senior economists of the country remain divided over whether the budget can be treated as a pure technical document.
Professor Bishwombhar Pyakuryal, Madan Dahal and Purna Bahadur Karna agreed with the businessmen, and urged parties to maintain budget as technical document, and not political document.
“Full budget must come at any cost for in its absence the country will not be able to attract foreign assistance, investment and execute development works,” said Dr Pyakuryal.
However, other economists like Dr Posh Raj Pandey beg to differ.
“Budget is more of a political document that aims to translate government´s political vision into reality. But in order to check possible imprudent spending and excessive taxation, our law requires it to be endorsed by parliament, which includes opposition lawmakers. Hence, the call for political consensus on full budget is fully valid,” said Dr Pandey.
On the same note, Dr Pushkar Bajracharya raised doubts that the full budget alone would enhance economic efficiency or investment climate or service delivery in the present context.
Budget through consensus: PM
Even though the budget crunch has made it difficult for the government to carry out even its regular activities, Prime Minister Baburam Bhattarai said that the government was still committed to bringing full-fledged budget through cosensus between the political parties.
“There is no alternative to consensus. Parties in the government as well as opposition understand this pretty clearly. Hence, we are making various efforts to bring the opposition on board so that we can have a full-fledged budget on time,” said Bhattarai.
He even expressed hope that the latest round of talks between the leading parties would eventually result in consensus between the parties. “But as it might take some time for the deal to be finalized, we also request the opposition leaders to first reach an understanding on bringing a full-fledged budget,” PM Bhattarai added.
In a bid to forge consensus, Bhattarai said he has instructed the finance minister to form a group of experts, including representatives from all the major political parties, to work out a common economic program.
“Energy and agriculture are priorities of all political parties. We can set a 10-year target and work out a consensus budget based on those common grounds,” said PM Bhattarai.