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VOL. 03, NO. 04, July 16, 2009 (Shrawan 01 2066) |
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BUDGET ANALYSIS
Futile ritual
By Binod Bhattarai
Yet another transitional government has just made yet another attempt to add more fuel to the already high aspirations of the people. The budget for 2009/10 once again repeats the chronic disconnect between those in Singadurbar and the man and woman on the street. Here’s what some people had to say on different television channels after the budget speech:
· “Budgetma bhashan matra sunauncha, kaam gardaina sarkar le” (The government only makes speeches, does nothing
· “Budget lagu bhaye ta ramro ho” (It would be a good budget if implemented)
· “Sabaithok garna khojda khichadi bhayeko cha budget” (While trying to do everything the budget has become like a multi-grain meal).
The gap between what successive governments have said they will do and what they actually get done has widened with almost every budget. It is likely that it will widen further in 2009/10, given the political instability that has marked the transition towards a new republic.
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| Finance Minister Pandey Presenting Budget: Populist slogan |
Last year, when Baburam Bhattarai announced a budget of Rs236 billion, the Maoist finance minister perhaps had a basis for trying something that was never attempted before in terms of budget size. After all, his party had emerged as the largest party in the Constituent Assembly election after spending 10 years in hiding, and therefore the public may have thought they deserved a chance because they were different.
But the all-too-familiar outcome was repeated once again. The Economic Survey released on July 13 reveals that the Maoists were no better than previous governments where revitalizing the economy was concerned. It has therefore been proven beyond reasonable doubt, again, that it is useless to promise and plan for what is unattainable.
Finance Minister Surendra Panday’s explained why Nepal is projected to attain only 3.8 percent growth in the Gross Domestic Product (GDP) of the 7 percent that was targeted. He blamed it on the “energy crisis, unfavorable weather, decline in capital expenditure, disturbed industrial sector, absence of elected local representatives and global economic crisis.”
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| Nepal Bandha: Affecting economy |
These were almost exactly the same reasons past governments gave to explain their spending failures. What Mr. Pandey has failed to acknowledge that these are the very reasons why he should have been more realistic and why he should have produced a budget that was implementable within the given constraints, which have not changed.
But it has not been the case. The government has planned to spend 285.9 billion in 2009/10 – a whopping 33 percent over the revised budget of 2008/09. Of this, 56 percent is to be spent on recurrent expenses – salaries, pensions and allowances for government officials and perks for politicians, among others. This is money that tends to get used up every year. In 2009/10 the budget for recurrent expenses was Rs128.5 billion of which around Rs122 billion is likely to be used up (95%).
The money for capital expenditure has been estimated at Rs106.3 billion (37% of the total). Last fiscal year the government had allotted Rs91.3 billion but it was able to use only Rs73.3 billion (80%).
Since the general political environment has not improved dramatically it would be difficult for the government, if not unlikely, to be able to spend as much on capital expenditures (see: table 1 for budget details)
THE ANALYSTS: Who said what?
"Achieving 5 percent economic growth and reducing inflation to 7 percent will not be possible if the state of lawlessness continues".
--Bishwomber Pyakuryal, Economist
"It seems the budget is marginalising the private sector's role."
-- Binod Chaudhary, CA member and business leader
"It is mum on revitalizing the state-owned enterprises and does not pledge judicious distribution of services."
-- Sri Ram Poudel, Senior economic advisor to former Finance Minister Baburam Bhattarai
"The budget is mum on revitalizing the industrial sector and does not spell a word on new industrial policy.'
-- Pradeep Jung Pandey, vice president Federation of Nepalese Chambers of Commerce and Industries
"The budget has introduced multi-year programs but what happens if it is not continued in the next year's budget?"
-- Rajendra Khetan, CA member and business leader
"... positive side of the budget is it has acknowledged the fact that monitoring and implementation is poor."
Shankar Sharma, economist (former Vice-Chairman of the National Planning Commission)
Source: The Kathmandu Post
Binod Bhattarai
Kathmandu, Nepal |
The budget for 2009/10 therefore only reinforces the adage that “Nepali politicians never learn”. It is expansionary and could push inflation – estimated at around 12 percent in mid-July 2009 and highest in 17 years – further, while spending is likely to remain constrained owing to the fragile politics in the centre, continuing lawlessness, and the resultant deterioration of investor confidence.
“The people want to see results on the ground, I don’t see signs that there will be many,” an economist at a development agency said.
Not unlike every government of the past, the UML-led coalition has tried to spice up the budget with a little bit here and a little bit there and increased allocation to the Afno Gau Afai Banau (Make your village yourself) program, first introduced in 1995. It has brought some well-focused programs that aim to quicken inclusion such as IDs for the poor, low-cost housing for Dalits, cash grants for inter-caste marriages of Dalits and non-Dalits, remarriage of widows, and compensation for kin of road accidents.
These programs are well-intentioned but lack the basis for implementation owing to questions such as the identification of the poor – which can be a massive exercise in itself – and the issue of tracking implementation in the absence of functional local government units. Without effective spending and monitoring mechanisms at the local level, it is not unlikely that these grants could either remained unused or be grossly misused – something, that political parties are very good at doing. The idea about compensating road accident victims – possibly aimed and ending instant chakka-jams – could set off a spending spiral because now there is an added incentive for using the roadways for things other than driving.
The budget fails to address the issue of capital formation, which is vital for economic growth. Much of the capital budget is transferred to local governments and essentially ends up as slush funds for the local elites – more so, in the present state of statelessness. A positive note in the budget is the attempt to take a multi-year approach to budgeting, which can help reign the ever-expanding size in the coming years. The multi-year approach can also simplify contracting processes and help towards completing projects on time, and within the estimated costs.
What is novel with the budget is paragraph 297, which provides 36 indicators for monitoring the implementation of the plan. This will be a valuable basis for measuring the performance of Finance Minister Pandey and holding the government accountable.
These indicators in Annex-11 include raising agricultural production by 36,000 metric tons, expanding black-topped roads by 550 kilometers, adding 12 megawatts of electricity to the grid, expanding literacy by 12 percentage points and reducing maternal mortality by 31 per 100,000, among others. Now it is up to every representative of the people to adopt the list and use to make the government accountable. An opposition scorecard on how the government has done on the indicators next year will be an indication of democracy and governance at work in Nepal.
(Bhattarai is a freelance journalist)
