----------Analysis--------
PRABHAKAR GHIMIRE
The government succeeded in bringing out the full budget amid uncertainty over the fate of the budget for the current fiscal year on the back of increasing lobbying from left-leaning parties and Madhesh-based parties not to get a full-fledged budget announced with programs having long-term impact by this election government. Those non-Congress parties were further apprehensive that Finance Minister Koirala and the Finance Ministry’s chief Economic Advisor Chiranjibi Nepal, both of whom are from Nepali Congress backgrounds, would undermine the concept of the three-pillars of economy -- Public, Private and Cooperative -- by only promoting the private sector in the budget. However, the budget announced by Koirala allayed the suspicions of other parties by reinforcing and acknowledging the importance of Public, Private and Cooperative sectors in the economy. “The coordinative and promotional role of the private, cooperatives and public sectors are important for spurring economic activities. The role of government will be strengthened to tide over the imbalances and malpractices that crop up in a free market economy. The role of cooperatives will be made stronger to increase production and employment at the local level,” Koirala announced unveiling the Rs 517.24 billion budget. To some extent the government has been able to avert the immediate obstacles in announcing the budget. But the uphill task of the government is how to effectively implement the programs to achieve the targets set in the budget. It is still uncertain that coming elected political government will accept or ignore the programs underlined by this technocratic government. There are heaps of challenges before this government of bureaucrats to get the economy on track at a time when the country has long been witnessing ballooning trade deficit, spiraling inflation, slow growth in recent year, a deepening power crisis, unfriendly labor environment, and bleak performance of agriculture and manufacturing sector. Last fiscal year, the government had to revise down the initially targeted growth rate of 5.5 percent to end up with 3.6 percent-- an impact highly attributed to the decline in agriculture production and late announcement of full-fledged budget. This year's budget has also set a target of achieving 5.5 percent growth and containing inflation at 8 percent which is not easily attainable given the allocation of meager development budget, uncertainty in performance of the agriculture sector, which depends on monsoon rains. Strengthening of US dollar against the rupee and double-digit rise in salary of civil servant will be great challenges for the government to tame the inflation in this year. The situation will be more complicated if food production is affected by weak monsoon in the farming seasons or other causes. Imbalance in supplies due to an almost double-digit decline in key farm products jacked up inflation to 8.2 percent by mid-June as against the government’s target of confining it at 7.5 percent. Worsening power shortage, deficit of skilled workers and labor unrest have limited industrial sector’s growth at 1.5 percent. The agriculture sector, which commands more than one-third of the Gross Domestic Product (GDP) of the country, also saw 1.3 percent growth last year. There is no guarantee that the agriculture sector will perform better this year as it highly dependent on the monsoon. The government has planned to spend Rs 85.12 billion -- around 16 percent of the total budget -- under capital expenditures this year which is only a 28. 7 percent rise compared to last year’s allocation. “It is very difficult to attain the set growth of 5.5 percent as the allocation for capital expenditure is still limited compared to the amount provisioned for regular expenditure,” says Hari Bhakta Sharma, the vice-president of Confederation of Nepalese Industries (CNI). Worse, the weak capacity of the government to spend the allocated resources for development activities also plague the economic activities leaving idle billions of rupees in the state’s coffers. This trend could repeat this year as well if the government fails to implement the budget applying strict measures. The government has to see tough times to drive up revenue by 20 percent as targeted by the budget as economic activities are slowing. A huge chuck of revenue is based on import of goods. Amidst the weakening supply capacity of Nepal in the international market, bringing down the skyrocketing trade deficit, which hovers at around Rs 1.45 billion per day, is not an easy nut to crack. We have not seen an immediate solution to the bloating trade deficit as the manufacturing and farm sectors are not functioning well enough to support increasing of the volume of exports. “The private sector has been recognized as the key sector economy and many programs and incentives announced in the budget have boosted confidence of the private sector. We want the government to monitor the implementation of the budget sincerely,” Bhaskar Raj Rajkarninkar, the first vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said. Though the government has acknowledged the soaring trade deficit as one of its key challenges, the budget has failed to come up with concrete measures that really boost exports from Nepal. Amid persisting load-shedding, which has not only affected normal life but also inflicted huge losses to the business sector, the government has rolled out a raft of incentives to promote power generation and expand transmission lines. But the task of land acquisition for transmission lines is a tough job due to resistance or exorbitant prices of land demanded by the local people. “Land acquisition for transmission lines will be a difficult job to complete even though the government has given priority to energy generation and extension of transmission lines,” Gyanendra Lal Pradhan, a hydropower developer, said. “The country has to come up with the low-growth trap which has been seen for last few years as a result of slowed growth in manufacturing and agriculture sectors. We need massive investment from both government and private sectors increasing spending capacity. However, adverse investment climate, we can’t expect such progress immediately,” says Mahesh Acharya, former Finance Minister. Acharya is also not optimistic that the target of limiting inflation to 8 percent is achievable in the current fiscal year as increasing production costs have jacked up from rising import bills, supply constrains due to unpredictable farm output and frequent labor disputes in the industrial sector. “Albeit off late, we have identified the problems crippling the economy. But we have long way to go by breaking the vicious cycle of low-growth trap to achieve impressive growth,” Acharya added. Though the government has the chief mandate of conducting the upcoming election of Constituent Assembly (CA), the budget has given significant priority to hydro power development, infrastructure, irrigation, education and agriculture allocating ample budget for these sectors. None can be confident that the huge allocation for these sectors can yield the desired results at the end of the current fiscal year. However, Finance Minister Koirala expressed confidence that timely announcement of the budget, followed by authorization and approval of the programs by the National Planning Commission (NPC), introduction of rules for budget management and accountability of concern officials, strict measures to ensure to effectively utilize the public fund and restriction on amendment of programs after mid April will support effective implementation and achieve set targets in the budget. “We are also sure that programs announced by us in the budget will be acceptable to future government,” adds Koirala. |
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Thursday, July 18, 2013
Heaps of challenges greet new budget
Monday, July 15, 2013
Per capita income touches Rs 62,797
PRABHAKAR GHIMIRE
KATHMANDU, July 13: Although slower economic growth, near double-digit inflation, ballooning trade deficit and marginal growth of the dominant agriculture sector marked the fiscal year 2012/13, per capita income of Nepalis edged up to Rs 62,797 from the Rs 58,274 recorded last year.
However, per capita income in dollar terms declined marginally to US $721 from US$742 last year, thanks to a weakening of the Nepali rupee against the greenback.
The Economic Survey 2012 made public by Finance Minister Shankar Koirala at a function today, shows that the national economy has expanded to Rs 1,701 billion though economic growth has been recorded at 3.6 percent at basic price, the lowest in recent years. The government had initially targeted achieving 5.5 percent growth.
“Decline in agricultural output played a major role in dragging down economic growth this year. Growth of the non-agriculture sector was not impressive though the industrial climate has been gradually improving,” said Koirala.
The government estimates that during the current fiscal year, the farm sector and non-farm sector grew by 1.3 percent and 5 percent respectively.
Imbalance in supplies due to an almost double-digit decline in key farm products jacked up inflation to 8.2 percent by mid-June this year as against the government´s target of containing it at 7.5 percent.
“Though we couldn´t keep inflation within our target, the average inflation rate could not touch the double-digit mark in the current fiscal year,” he said.
Skyrocketing trade deficit, which touched Rs 438.67 billion during the first 11 months of the current fiscal year, has been identified as another challenge in the economy. “Imports have been spurred by increasing disposable income, and dependence on imported goods in the domestic production system has gone up,” said Koirala.
Revenue mobilization reached Rs 280 billion as of July 10 this year, which is close to the target of Rs 289 billion for the current fiscal year.
However, the government has failed to spend as per the target set for the year. Though the government announced a budget of Rs 404.82 billion for the current fiscal year, only Rs 317 billion was spent by July 10, excluding expenditure reported in 15 districts where the Treasury Single Account (TSA) system has not been implemented.
“We couldn´t spend the targeted amount as we couldn´t announce the budget on time,” he said.
However, a balance of payments surplus of Rs 52.69 billion, a 21.3 percent rise in remittance inflow to touch Rs 388.46 billion. and record high foreign exchange reserves worth Rs 511.69 billion at the end of the current fiscal year have brought cheer among officials.
The Economic Survey also shows that the share of consumption in the Gross Domestic Product (GDP) increase to 90.7 percent this year from 87.3 percent recorded last year.
During the first eight months of the current fiscal year, the government added 1,987 km transmission lines, 128 km black-topped roads, 169 km gravel roads and 194 km earth roads despite the low spending capacity of the government due to late announcement of a full budget.
During the corresponding period last year, the government had constructed 15 km black-topped, 45 km gravel and 185 km earth roads. The total strength of the road network across the country has increased to 24,573 km.
The number of telephone users by the end of the first eight months of the current fiscal year reached 19.6 1 million with mobile phone users covering over 85 percent of that figure. As of the end of the same period last year, the total number of telephone subscribers was recorded at 15.61 million with mobile users constituting 83 percent.
However, the government achieved a marginal rise in school enrollment. Enrolment in primary and secondary schools was 95.3 percent and 32.4 percent, up from 95.1 percent and 30.6 percent respectively last year.
Despite the adverse economic climate in the country, the government succeeded in adding 1,256 new schools, including 417 primary schools, 656 lower secondary and 183 secondary, over the year.
The government could add only two new hospitals and 250 hospital beds during the first eight months of the fiscal year. The total number of health institutions across the country, including big hospitals and health posts, stood at 4,393 at the end of the eight months.
Despite the unimpressive progress in health infrastructure, the infant mortality rate during the year dropped to 9 per 1,000 live births and maternal mortality rate declined to 229 per 100,000. Mother-child health programs launched by the government are major contributors towards controlling infant and maternal mortality in the country.
The government has been able to increase power generation by 41 MW during the first eight months of the current fiscal year to bring it up to 746 MW. Prolonged load-shedding, frequent labor strikes and shortage of workers have crippled the industrial sector. However, the service sector has shown some improvement.
Economy at a glance:
· GDP growth rate: 3.6% at basic price
· Economy size: Rs 1,701 billion
· Inflation: Approx. 8.2%
· Per capita income: $721
· Growth of agriculture sector 1.3 percent
· Non-agriculture sector growth 5 percent
Social Sector at a glance:
· New hospitals, health posts: 2 hospitals
· Newly added hospital beds: 250 beds
· Infant mortality rate: 9/1000 live births
· Maternal mortality rate: 229/100,000
· New schools: 1,256
· Enrollment in primary education: 95.3%
· Freshly added roads: 491 km
· Telecom service subscribers: 19.61 million
Rs 517.24 billion full budget for 2013/14
----------------------Budget 2013/14----------------------------------
PRABHAKAR GHIMIRE At a time when some left-leaning and Madhesh-based political parties were doubting over the commitment of the government for the development of cooperatives, the budget has clearly recognized the cooperative, public and private sector as the major players of economy. “Coordinative and promotional role of private, cooperatives and public sectors is important for economic activities. Role of government will be strengthened to tide over the imbalanced and malpractices cropped up in market economy. Role of cooperative will be made more stronger to increase production and employment at local level,” said Finance Minister Shankar Koirala, unveiling the budget. The new budget announced by Finance Minister Shankar Koirala gives continuity to most of the programs included in the previous fiscal year’s budget. Allocations for the Constituent Assembly (CA) elections and double-digit hike in the salary of civil servants have significantly jacked up recurrent expenditures. The government has allocated Rs 353.42 billion or 68 percent of the budget for recurrent expenditure, Rs 85.10 billion or 16.45 percent for capital expenditure and Rs 78.72 billion or 15.22 percent for financial management. The budget plans to mobilize Rs 354.5 billion through revenues, Rs 69.54 billion through foreign assistance and the deficit through domestic borrowings. The government has set target to increase revenue mobilization by 20 percent to arrange the resources for increased recurrent expenditure. -Agriculture Rs 21.40 billion -Education Rs 80.95 billion -Irrigation Rs 12.56 billion -Physical infrastructure Rs 35.27 billion -Health Rs30.43 billion -Energy Rs 30 billion -Economic growth target 5.5 percent - To contain inflation at 8 percent “The government’s main priority is to successfully conduct the CA elections and the government has allocated Rs 16 billion for it,” said Koirala, adding that allocations have also been made for hydropower development, construction of roads and railways, irrigation, drinking water and tourism. The government has made some attempts to get 5.5 percent economic growth with high priority in agriculture, education, irrigation, infrastructure, energy and exports promotion in the coming fiscal year. Nepalese economy saw only 3.6 percent growth during the fiscal year 2012/13. Amid double digit inflation, the budget has also set target to contain the inflation at 8 percent. The budget has also attempted to win the heart of private sector with some business incentives in investment, industrial and export sectors. “We appreciate that government which has come up with full-fledged budget with some incentives to boost confidence of private sector. The budget has also recognized the role of private sector in the economy,” said Bhaskar Raj Raj Karnikar, Senior Vice President of Nepalese Chambers of Commerce and Industry (FNCCI). The budget has also included Pashupati Area Development Trust, Lumbini Development Trust, President Chure Bhawar Conservation Project and Bheri-Babai Multipurpose Diversion project among national pride projects. The budget has made an allocation of Rs 30 billion for hydropower development and construction of transmission lines. For promotion of solar energy, Rs 1.11 billion has been allocated under the solar energy promotion program that will benefit 125,000 households through generation of 4MW electricity. The government has also allocated Rs 1.81 billion for road expansion works in the capital and Rs 3.58 billion for construction of strategic roads and local bridges. In a bid to boost the morale of government employees, the government has also hiked their salary by 18 percent. They will also be provided Rs 1,000 in monthly allowance. Similarly, the government has allocated a total Rs 21.40 billion, up by around 81 percent of the current fiscal year’s revised allocation for the agricultural sector. Likewise, Rs 6.07 billion has been allocated for subsidizing fertilizers, seeds, technology and mechanization and Rs 1.75 billion for agriculture research. Amid bleak performance by community schools, the budget also plans to provide Rs 500,000 each to two best performing community schools and introduce performance contract system for head teachers of such schools. Education sector budget has reached Rs 80.85 billion, up by Rs 60.13 billion of current fiscal year’s revised allocation. The government has also made arrangements for free treatment to heart patients above 75 years and below 15 years of age. As at least 400,000 youth enter the labor market annually, the government plans to spend Rs 160 million to provide skill development, entrepreneurship and self-employment training to 22,000 youths and vocational trainings to another 50,000 youths. Amid deteriorating industrial environment in the country, the budget attempts to restore private sector confidence by providing them incentives. The budget also envisions development of Special Economic Zones in additional four places -- Nawalparasi, Kailali, Dang and Surkhet, smooth electricity supply to industrial estates and establishment of international standard exhibition center in the capital. “The government considers the private sector as a key vehicle for economic growth,” Koirala said. Amid ballooning trade deficit, the budget has come up with export incentive programs. The budget has also introduced fast track service for exporters and doubled the amount allocated for |
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Wednesday, July 10, 2013
Trade infrastructure, quarantine issues Nepal�s top agenda
PRABHAKAR GHIMIRE
The Ministry of Commerce and Supplies (MoCS) has sent invitation to Chinese officials for the talks which is proposed to be held in Kathmandu on August 11 and 12. “After holding series of consultation with the stakeholders, we have listed around half a dozen issues to discuss in the 4th Nepal-China-Tibet Trade Facilitation Committee (NTTFC) meeting,” a highly placed source at the MoCS told Republica. “We will soon sit with the private sector to finalize the agenda.” The third meeting of NTTFC was held in Lhasa of Tibet on July 4 and 5 last year. At the meeting, both the neighbors had signed a memorandum of understanding (MoU) that paved the way for exporting Nepali citrus fruits -- oranges and sweet oranges -- to Tibet. This time, Nepali officials are requesting the Chinese side for support of the northern neighbor in development of trade infrastructure. “As infrastructure development is crucial for trade between the two countries, we are requesting China to extend support for building an ICD in Rasuwagadi and improving Kathmandu-Tatopani road at the joint-secretary level talks,” the source said. Similarly, harmonization of time between customs offices of two countries, opening up branch offices of Chinese banks in Nepal and simplification of quarantine process for Nepali goods are also among the topics for discussion proposed by the Nepali side. “Besides these, we will also held discussion on trade promotion in China at a time when Nepal is witnessing huge trade deficit with the northern neighbor,” said the source. Ahead of the annual trade talks with the world´s second largest economy, business people have demanded that the meeting explore the ways to bring down Nepal´s trade deficit with China. “As we have been failing to take optimum benefit from the zero tariff facility provided by China for 7,787 Nepali products, the meeting should include products having huge prospects in China in the list so that we can utilize the facility provided by our neighboring country,” Rajesh Kaji Shrestha, president of Nepal China Chamber of Commerce and Industry (NCCCI). According to Trade and Export Promotion Center (TEPC), Nepal´s exports to China increased by 164 percent during the first ten months of the current fiscal year while imports increased by around 29 percent. However, Nepal´s trade deficit with its second largest trade partner reached Rs 54 billion during the review period. Nepal had suffered trade deficit worth Rs 42 billion in the same period last year. Shrestha also demanded that Nepal request Chinese officials to recognize quality certification issued by Nepali labs for agro produces and livestock being exported to China. Nepali traders have been facing problems as China does not accept quality certificates issued by Nepali labs. He also stressed the need to initiate direct flights to Beijing and Shanghai from Kathmandu and open branch offices of Chinese banks in Nepal. |
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Thursday, July 4, 2013
Reds, Madhes parties press prez for non-populist budget
PRABHAKAR GHIMIRE
They are apprehensive that Finance Minister Shankar Koirala and Chief Economic Advisor to the Ministry of Finance (MoF) Dr Chiranjibi Nepal, who are from Nepali Congress backgrounds, could frame a budget program dominated by the ideology of liberal economics that puts the private sector at the very center. In line with a three-pillar economic policy, which envisages roles for public, private and cooperative sectors as major players in the economy, the government at the time UCPN(Maoist) leader Dr Baburam Bhattarai was finance minister, had prioritized the cooperative sector in the budget. Subsequent governments led by the CPN(UML) and UCPN(Maoist) also promoted the cooperative sector as a major pillar of the economy. However, Finance Minister Koirala and Chief Economic Advisor Nepal, who can influence the budget hugely, have been advocating a private sector-led open liberal economic policy in an attempt to boost the confidence of business people. “After leaders of the UCPN (Maoist), CPN(UML) and Madhes-based parties expressed dissatisfaction that the government ignored the cooperative sector on the excuse of promoting a liberal economy, the president at a meeting with Chairman of the Interim Election Council Khilaraj Regmi on Sunday, expressed his wish for a budget that does not change the programs included in the current fiscal year,” a high-level source at the Office of Prime Minister and Council of Ministers (OPMCM) told Republica Wednesday. The source also said they had exerted pressure on the president to instruct the government not to formulated populists programs that promote the liberal economic agenda. Opposition parties had prevented the government led by Dr Baburam Bhattarai from announcing a full-fledged budget, arguing that an election government had no such authority. “The president might have expressed a wish to get the budget announced in line with the programs of the current fiscal year as the incumbent government is also an election government like the previous one,” the source added. Dissident party leaders have accused the government of ignoring the spirit of the Interim Constitution which considers the cooperatives sector one of the three pillars for national development. Article 35 (2) of the Interim Constitution states that the state shall pursue a policy of developing the economy of the country through the governmental, cooperatives and private sectors. “Though we are for a full budget for next fiscal year, we can´t accept populist programs and policies with far reaching effect. And we do not want the budget to become a shadow of Nepali congress policy,” Basha Man Pun, a UCPN(Maoist) leader and former finance minister, told Republica. Meanwhile, former finance ministers and economists representing different political parties have underlined the need to announce a full-fledged budget but without including new populist programs. Speaking at an interaction in the capital, Bharat Mohan Adhikari, former finance minister and CPN(UML) leader, stressed the need to announce a new budget. However, he was not for including any new populist programs. “I wholeheartedly support a full-fledged budget but this election government should not incorporate new flagship programs,” said Adhikari. Leader of the Nepali Congress and economist Dr Prakash Saran Mahat also opined that the government should comes up with a full-fledged budget without altering any tax rates and without including any controversial programs. Dr Prakash Chandra Lohani, former finance minister and senior leader of the Rastriya Prajatantra Party, underlined the need for announcing a full budget with a strong commitment to implementing existing programs rather than focusing on new ones. On the occasion, Chief Economic Advisor Nepal said the government was not coming up with new programs for the coming fiscal year, as feared in different quarters. Talking to Republica, Nepal clarified that the present government was not undermining the cooperative sector as the other party leaders feared. “We are not against the development of cooperatives, which flourish in capitalist countries like the US, Canada and Singapore. Cooperatives can develop only in liberal economies led by the private sector,” Nepal said. He, however, claimed that the confidence of the private sector had been boosted by the government´s commitment to develop that sector. |
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