Infrastructure, connectivity in priority in budget; implementation remains key

The government will be presenting the fiscal budget for 2022-23 focusing on economic recovery, boosting productivity, creating jobs, conducting mandatory task of elections, and most importantly, addressing the challenges of macroeconomic stability.

The fiscal budget will be presented in the Parliament on May 29 as per the provision of the constitution despite the regular obstruction of the Parliament by the main opposition Communist Party of Nepal (UML). The Finance Minister has to present the principles and priorities of the upcoming budget in the Parliament 15 days prior to the presentation of the fiscal budget according to the provision of the Fiscal Procedure and Financial Accountability Act.


Ceiling and priorities

The Ministry of Finance and National Planning Commission (NPC) are responsible for selecting projects and programmes as well as earmarking resources following the recommendations made by concerned line ministries. The planning commission has sent a budget ceiling of Rs 1.745 trillion (Rs 1,745 billion) for the next fiscal year. The size of the proposed budget ceiling is Rs 112.17 billion, nearly 7% up from the budget size of the ongoing fiscal year.

Biswo Nath Poudel, Vice Chairperson of NPC – the apex planning body of the government – has mentioned that some milestones will be launched through the budget. “It will cost Rs 35 billion for the entire electrification of the country and we have decided to make it happen,” he said. Though it could also be a multi-year project due to resource constraints, the government intends to accomplish some targets.

“We are focused on addressing the infrastructure bottlenecks and connectivity is the topmost priority,” stated Poudel. “Productive capacity enhancement, skills and entrepreneurship development, sustainable education, and developing human capital by enhancing the quality of investment in education, health, water and sanitation, electrification, among others are the priority,” he elaborated.

Poudel also said that the government is focused on enhancing the quality of education at the foundation level, basically school level education must be transformed to provide necessary impetus to improve academic skills in higher education and learning through technical and vocational education (TVET). Under its initiative of gender equality and social inclusion in the education sector (GESI), the government plans to develop girls hostels at the periphery of schools to encourage female enrolment and completion of school education as well as to safeguard girls from gender-based violence.

Completion of the national pride projects including Millennium Challenge Corporation (MCC) funded high-capacity transmission line and road upgradation projects will be a major priority of the budget.

Feasibility study of Butwal-Kathmandu bullet rail will be carried out along with completion of the ongoing upgradation of highway sections namely Narayanghat-Butwal, Kamala-Kanchanpur, Kakarvitta-Koshi, and Pathlaiya-Dhalkebar-Narayanghat under the support of different development partners.

The required budget will be provided to Nepal Army to accelerate the Kathmandu-Terai Fast Track. Nepal Army has hardly spent Rs 5 billion in the ongoing fiscal year out of the earmarked budget worth Rs 23 billion.

The fiscal budget might earmark around Rs 20 billion for the Fast Track, and the administrator of the project, Nepal Army, must expedite the much-awaited Kathmandu-Terai Fast Track.
In a bid to enhance the quality of life, the government plans to grant packets of cement and rods to replace thatched roofs with modern roofing materials, if resources permit. Along with this the upcoming fiscal budget will give due priority to developing riverside corridors with proper embankment for the protection of vulnerable populations.

Mitigation of climate change impacts, adaptation techniques and early-warning system in disaster prone areas and disaster response will be given due priority in the budget.

Rameshwore Khanal, former Finance Secretary, has said that the government must focus on disaster preparedness and response with an aim to minimise the colossal loss of property and lives, citing that the country has encountered nine major shocks since 1990 — flood, earthquake, inundation, fire, storms, among others. “Frequencies and severity of such disasters have also increased in recent years,” said Khanal. “The government should not overlook the challenges of natural disasters that cause multiplier impact on human lives.”


Committed liability

The government’s committed liability will go up in the coming fiscal year as the elections – provincial assemblies and federal parliament – are going to take place in the next fiscal. According to the whitepaper issued by the Ministry of Finance early this fiscal, the government’s committed liability has surged to Rs 400 billion. Election expenses will also be a committed liability of the government.

As the elections are going to be conducted in the next fiscal, the government has said that it will earmark budget in a scientific manner as the election code of ethics and other formalities do not allow the Ministry of Finance to approve the amendments in the programmes and projects and transfer funds midway during budget execution.

Minister for Finance Janardan Sharma, however, said that the budget will be framed in consensus and feedback of the ruling parties. He further added the next fiscal budget will be framed based on the common minimum programmes of the five-party alliance. “The budget will be focused on addressing the structural constraints of the economy,” said Sharma. “Self-reliance by boosting productivity, encouraging investment in industries using local raw materials, investing in value chain development, enhancing labour factor productivity and raising exports will be the priority of the budget,” he stressed.

He has also defended his earlier policy of lowering the excise and customs tariff on import of sponge iron to produce MS-billet and iron rods in the country by saying that it will help in consuming spill energy as the country will have excess electricity in the near future.

However, private sector players have advised the government to expand the tax net rather than increasing rates. Further, the Ministry of Finance is consulting with multiple stakeholders to encompass a wider perspective in the fiscal budget 2022-23.


Focus on implementation

Different umbrella associations of the private sector have advised the government to bring an implementable budget rather than a high-sounding one. “The implementation challenges have hindered the government’s performance in budget execution,” said Vishnu Kumar Agarwal, President of Confederation of Nepalese Industries. “The success of the government is judged through implementation of its policies and programmes.”

Likewise, Shekhar Golchha, President of Federation of Nepalese Chambers of Commerce and Industry, has urged the government to create an environment for the private sector to do business focusing on the manifold challenges caused by the Covid 19 and recovery of the economy that was shattered by the pandemic. Golchha further stated that many sectors of the economy are struggling to recover and the government should address each sector based on its specific needs balancing it with the existing pressure on macro-economic stability.

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Pushpa Raj Acharya

Pushpa Raj Acharya writes on private sector development, governance reform, taxation, trade/investment and financial sector. He is in journalism since 2007. He had served for Karobar Daily, Republica, The Himalayan Times and Annapurna Post before he started writing for Business 360. He is former president of the Society of Economic Journalists- Nepal (SEJON). He has interest in multimedia journalism & advocates for ethical and responsible journalism.

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