 |
| Presenting the defense in IAAS. |
Monday, December 3, 2012
Critical Review of National Budget Lecture 2067/2068 (2010/2011)
Critical Review of
National Budget Lecture 2067/2068 (2010/2011)
1. Introduction
Budget
is not only a detailed annualized account of the country's estimated income and
expenditure; it is also a document that provides guidance and direction to the overall
economy of the nation. Historically, Nepal is now passing through a spectacular
phase of transition from feudalism to national industrial capitalism, and
taking that into account, obviously, Nepal's economy seems marred by a big
uncertainty and fragility. This would mean that the people belonging to various
economic and social classes might naturally cherish different expectations from
the budget.
Following
the midnight fracas in parliament that prevented budget estimates for fiscal
year 2010-11 to be presented in the legislature-parliament, the Cabinet met
midnight of Nov. 19 and decided to ask the president to promulgate budget
through Ordinance and abruptly end the legislative session. The government
described the UCPN-M assemblymen unparliamentarily behavior as a ‘terrorist
mindset’ while UCPN-M Chair-man Pushpa Kamal Dahal argued such practices were
‘common’ in parliamentary democracies.
On
Nov. 20, Finance Minister Surendra Pandey unveiled the ‘Public Statement on
Income and Expenditure of Fiscal Year 2010-11’ outlining the total expenditure
of Rs. 337.90 billion or 30.4 percent more than previous FY. There has been no
major policy departure from the previous policies and programs. A lion’s share
of the expenditure – Rs 190.32 billion or 56.3 percent – goes to recurrent
expenditure while Rs 129.54 billion or 38.3 percent will go to capital
expenditure. Similarly, Rs 18.42 billion or 5.4 percent will go for principal
payment of loans. The recurrent expenditure has been increased by 25.8 percent
and capital expenditure by 44.8 percent. The main sources of financing are
revenue and foreign grants. The government hopes to collect Rs 216.64 billion
in revenue alone, which many de-scribe as overly ambitious given its sluggish
growth in the past four months. Out of the total revenue, the Finance Minister hopes
to mobilize Rs. 19.21 billion through changes in tax and administrative
reforms. It also estimates to receive foreign grants amounting to Rs 65.34
billion. This leaves the deficit of Rs 55.91 billion. Of the total deficit, Rs
22.23 billion is to be financed from foreign loans, and Rs 33.68 billion from
domestic borrowings.
One
of the notable features of the development outlays in the policies and programs
of the government is the focus on infrastructure development with substantial
allocation for such projects. This is a correct approach that would, if
implemented honestly, would contribute to faster economic growth. The budget
for road sector and hydropower has been increased from that of last year’s. The
government has also allocated budget for railway and water transportation. The
social sector has also not been neglected, given the resource constraints. The
education sec-tor, for example, has received 17.06 percent share of total budgetary
allocations. In health sector, government aims at expanding free maternity
service. The overall target is to achieve 4.5 percent growth rate and limit
inflation at 7 percent.
Since
the presentation of budget estimates were inordinately delayed due to political
infighting and discords, implementation of the policies and programs would be a
major challenge for the caretaker government in view of the delay in formation
of a new government. There is no doubt that the bud-get had inauspicious start
from the very beginning, reflecting the intensified political polarizations as
government prorogued the House and brought budget through ordinance.
2.
Objectives of
the Budget
In
line with the vision elaborated above, the budget has set following objectives:
1.
Making democracy more people-centered with the institutionalization of the
Federal democratic republic.
2.
Sustaining peace in the country by bringing to logical conclusion the peace
process on the basis of the Comprehensive Peace Accord (CPA) agreed between the
Nepal Communist Party (Maoist) and the seven political parties.
3.
Accelerating the process of economic and social transformation to accomplish
the great mission of building just, advanced and prosperous new Nepal.
4.
Achieving higher economic growth that comes along with geographical and
regional balance, social justice and employment opportunities.
5.
Providing immediate relief to the people to make them feel that the country has
really become a republic.
6.
Erecting foundation of a self-reliant and independent economy through optimally
mobilizing the national capital and indigenous resources.
3. Highlights
of the Budget
While
formulating this budget, Mr. Surendra Pandey had given due consideration in strengthening
the fundamentals of economy as outlined in the Three Year Plan. It had proposed
programs keeping in mind peace process, state restructuring and state of
transition to ensure the completion of writing of the Constitution of the
Federal Democratic Republic of Nepal by 28 May 2011. It had endeavored to give
continuity to the ongoing programs rather than initiating new programs. It had
highlighted economic and social sect oral outcomes in Annex 10 of this speech.
With the implementation of this budget, he expects economy to grow by 4.5 percent
in the current Fiscal Year. Inflation is expected to be 7 percent and the
balance of payments surplus will reach Rs. 9 billion.
I.
Infrastructure of National Pride
Allocation
has been made by according high priority to the provisions of physical infrastructures.
Emphasis has been given to complete the projects which are being implemented
from the past. It had allocated Rs 1.21 billion for the widening and opening of
remaining track of Mid-hills Highway (Puspa Lal Highway). It had also accorded
priority for mobilizing additional resources for the upgradation and black
topping of this high way. It had
allocated Rs. 630 million for the construction of Syafrubesi- Rasuwagadi Road
under North-South linking highway. It had made a provision of Rs. 540 million
for the construction of North-South.
Highways of
Karnali, Kali Gandaki, Koshi corridors and Tapalejung-Olangchunggola and
Tamakoshi-Lamabagar-Falate roads. The construction of the first phase of 640
kilometers long Postal Highway which passes through East to West Terai will be
completed within the next 30 months. Of the 39 bridges to be constructed under
this Highway, 22 bridges will be constructed that year and design of remaining
17 will also be completed. It had allocated Rs 2.81 billion for this purpose. It
had accorded high priority for the construction of Kathmandu-Terai/Madhesh Fast
Track Road. It had allocated Rs. 680 million for opening the track next year. A
High Level committee, with full authority, will be formed to complete the
acquisition of land along this road within the next six month. Tamakoshi
Hydropower Project is being constructed with domestic investments and technical
manpower. Construction of civil structure has been already started to ensure
completion of this project within Fiscal Year 2014-15. A sum of Rs. 2 billion
has already been disbursed for this project. There will be no budgetary
constraints for the completion of this project. It had allocated Rs. 370
million for the ongoing Ranijamara-Kulariya Irrigation Project of Kailali
district, and also allocated Rs. 980 million for the Sikta Irrigation Project.
II.
Social Security
v A sum of
Rs. 8.95 billion has been allocated to give continuity to the social security
allowances. Distribution of social security allowances will gradually be made
through the banking system.
v "Child
Protection Grant"
·
Targeted to the children under the age of five year of poor-Dalit in
the country and all families in Karnali Zone, initiated from the last year, and
has been given continuation.
·
It had allocated adequate amount of grant for the transportation of food
grains, salt, seeds and chemical fertilizers in remote areas.
·
A sum of Rs. 200 million has been allocated for the human development,
and for the protection of culture and heritage of indigenous people, ethnic
groups, Dalit, neglectedoppressed, Madhesi, Muslim, Madhesi, backward
and marginalized groups.
v It had made
separate arrangements for the appropriation of one percent income tax being
charged as social security from the beginning of the last year. For the
utilization of this fund in the social welfare of the contributing employees
and labors, a permanent Board of Directors consisting of representatives from
the labor, the employer and the Government will be formed.
III.
Women Empowerment
·
A sum of Rs. 60.61 billion i.e. 17.9 percent of the total budget has
been allocated for the programs directly benefitting the women.
·
It had allocated budget to establish a separate fund for the
continuation of the programs initiated under the special campaign against
gender based violence.
·
Even in this 21st century, there are still some incidents of Nepalese women
forced to bear the cruelty and inhuman sufferings for not bringing dowry, and
on accusation of witch. Likewise, heart-breaking examples of the small girls
and teens who are compelled to be the victims of rape cases can also be seen in
our society. These unforgivable and cruel misdeeds are shameful to the human
civilization too. From now on, arrangement will be made to treat such crimes as
the case against the state and all the legal expenses of victims will be met
from the state treasury.
IV.
Sports
·
Nepalese players are already to participating in the 16th Asian Games. For
this, it had allocated necessary budget.
·
It had allocated Rs. 100 million for the 6th Grand National Sports Competition
to be held in February/March of 2011. League matches will be organized aiming
at increasing the efficiency of the Nepalese youths in football game.
·
Arrangements will be made to provide cash prizes to the Nepalese players
winning Gold Medals in Olympic, Asian and South Asian Games. Similarly,
arrangements will also be made to develop sports infrastructure and organize
periodic sports competition in each district.
·
Construction of regional sports complexes in Sunsari, Chitawan and Kailali
will be continued. A stadium will be constructed in Damak of Jhapa.
·
A sum of Rs. 40 million has been allocated for the construction of
cricket grounds of international standard in Mulpani of Kathmandu and Bhairahawa
of Rupandehi.
V.
Targeted Program for Poverty Alleviation
·
A sum of Rs. 3.04 billion has been allocated for the social
mobilization, income generation, self-employment, small community
infrastructure development, skill enhancement and creative programs, through
Poverty Alleviation Fund.
·
These programs are targeted to women, Dalit, Madhesi, ethnic groups and
backward groups falling below the poverty line.
·
A sum of Rs. 250 million has been allocated for Karnali Employment
Program.
VI.
Reconstruction, Rehabilitation and
Combatants Reconciliation
·
It had continued the programs for the relief of conflict-affected person
or group, and for their socialization, rehabilitation and reconstruction.
·
It had allocated a sum of Rs. 1.88 billion for the monthly allowances and
livelihood for the combatants, and also for the management of the temporary
camps.
VII.
Agriculture
·
With a view to attaining self sufficiency and promoting exports of meat,
livestock development programs will be implemented as a campaign. It had allocated
Rs. 1 billion for the provisions of concessional loans to the livestock raising
farmers to be lent through Small Farmers Development Bank and Small Farmers
Cooperatives.
·
It had increased the budget for the "Karnali Zone Special Agriculture Development
Program", which has been implemented from the past. This budget
had also given emphasis to implement programs including transportation of
fertilizer, seeds, small irrigation, training and extension to increase
agriculture production in other districts with facing threats of food shortage.
·
This budget had allocated Rs. 2.75 billion by substantially increasing
the subsidy to be provided to the farmers on chemical and organic fertilizer.
·
It had made arrangement to provide 50 percent capital subsidy to the cooperative
of the small farmers to purchase machinery and equipment for processing
cardamom, ginger, tea, coffee and honey.
·
It had allocated amount to enhance the learning and capacity development
program of the small farmer cooperatives.
·
This budget had allocated Rs. 980 million for the research and
development program in the agriculture sector.
·
Cooperative sector will be motivated to establish and operate large agriculture
and animal farms.
·
The Government will make
arrangements to provide of infrastructures like roads, irrigation and
electricity for cooperative farming.
·
In order to encourage the cooperatives willing to establish and operate fruits
and vegetables collection centers, chilling centers, cold storage and animal
slaughter houses, it had continued the provision of providing subsidy for their
capital expenditures to be incurred in the construction of infrastructure for
such works.
·
A Bill on Public Warehouse will be drafted within this Fiscal Year.
·
It had continued the policy of providing 50 percent subsidy to the insurers
on the premium they pay for the insurance of agriculture and livestock.
VIII.
Irrigation
·
This budget had allocated Rs. 9.01 billion to provide irrigation
facility in additional 81,475 hectares area in this Fiscal Year.
·
It had allocated budget for the construction of Jamuni Irrigation
Project in Bara district and allocated budget for Siphon on Babai river of Bardiya.
Irrigation facility will be available in additional 41,000 hectares area with
the completion of these projects.
·
It had allocated a budget of Rs. 860 million for the completion of medium
sized irrigation projects being constructed and also for feasibility study of
new projects.
·
It had continued the People's Embankment Program initiated from the last
Fiscal Year.
IX.
Commercial Land-use
·
This budget had proposed a change in the land management system from the
current Fiscal Year in order to maintain a balance in economic growth, commercial
system and environment by eliminating the contradictions and weaknesses prevailing
in our traditional land management system.
·
The existing land classification system will be refined. From now on, land
will be classified into six categories; agricultural, industrial, forestry,
commercial, residential and public community. Ownership certificates will be
issued accordingly.
·
Individual or companies willing to construct residential buildings by developing
land need to complete all the construction works ready for sale within five
years. A policy will be adopted in respect of the saving mobilizing agencies
for constructing residential buildings under joint venture and selling it to
the targeted group on a priority basis.
X.
Forestry Development
·
It had allocated Rs. 4.30 billion for the development of forestry
sector.
·
It had proposed to implement "Presidential Chure Bhawar Area Preservation
Program" from this year for the integrated conservation of
Chure area, which is an important source of biodiversity and natural resources
as well as the base for long term socio -economic benefits of the Terai area.
·
This budget had allocated for the implementation of the campaign for the
preservation of Tiger, which has been regarded as very rare and prone to extinction
all over the world.
XI.
Transport
·
It had allocated Rs. 2.52 billion for the regular and periodic repair
and maintenance of the roads.
·
It had allocated budget for the construction of railway and metro and development
of water ways. Likewise, procedural simplification will be made for development
of cable cars
·
It had allocated Rs. 700 million for the construction of six lane wide roads
linking international trade routes namely Birgunj-Pathlaiya, Belahiya-Butwal,
Rani-Itahari and Surya Binayak-Dhulikhel..
·
Construction of bridges over roads under construction will be continued.
Priority is given to the construction of bridges linking highways (Lok Marga)
and district headquarters. It had allocated Rs. 1.90 billion for this purpose.
The old bridges of Godawari of Dhangadhi, Bheri of Surkhet, Dharke and Mugling,
and bridges across Pathalaiya to Koshi will be maintained and repaired with
priority.
·
It had allocated necessary budget for upgrading Basantpur-Terhathum, Hilepaani-Diktel,
Rakse-Mangalbare-Nepaltar, Chandra Nigahapur- Gaur, Tokha-Gurje Bhanjyang,
Dakshin Dhoka-Sankhu-Kaule, Maldhunga-Beni, Bhaluwang-Pyuthan,
Ameliya-Tulsipur-Salyan, Chakchake-Libang, Surkhet-Siyakot,
Sanphebagar-Mangalsen and Sanphebagar-Martadi roads.
·
A sum of Rs. 80 million has been allocated for the construction of Seti Highway.
·
This budget had also allocated for upgrading roads of touristic
importance which are either under construction at a very slow pace or the very
old roads which are suffering from very poor attention to their repair and maintenance.
XII.
Modern Well Organized Residence and Urban
Development
·
With a view to establish10 new modern cities for business and residential
purpose in the vicinity of Mid-hills Highway (Lok Marga) and North-South
corridors, infrastructural mapping will be initiated from the current Fiscal Year
after the identification of the location and completion of their feasibility
studies.
·
“People’s Housing Program” is given
continuity and this year will be extended to Chepang, Raute and Kusunda
community’s settlement areas.
·
There has been an increasing trend of constructing unmanaged residential
buildings in the fertile land. Urban density of population is rising
phenomenally. A National Building Code will be revised and brought into
implementation in order to manage and facilitate modern amenities to address
increasingly unmanaged urbanization and housings.
XIII.
Local Development
·
It had given continuity to the grants being provided to local bodies. Timely
revisions will be made in the procedures of budget release and expenditure
management.
·
It had made some policy arrangements for the implementation of infrastructure
projects with the guarantee of a minimum of Rs. 10 million in each Constituency
from the budget that is currently being allocated through the local bodies.
XIV.
Hydropower
·
It had allocated budget for the completion of Trishuli III “A” (60mw), Kulekhani
III (14mw), Chameliya (30mw) and Rahughat (30mw) Hydropower projects.
·
Construction will be initiated for large and medium sized reservoirs projects
at least one in every Development Region. In this context, Budhi Gandaki
(600mw), Naushyalgad (400mw), 300 Tamor (300mw) and Aandhikhola (175mw)
projects will be brought into operation under the appropriate partnership.
Feasibility study will be carried out for Tamakoshi V and Upper Arun Project.
·
Micro hydropower production work will be accelerated as a campaign with
the initiative of local bodies' also by mobilizing local capital. It had
allocated Rs. 1 billion for this purpose.
XV.
Information and Communication
·
A Code of Conduct will be formulated in order to maintain standard quality
of the services being provided by internet service providers and also to
control possible misuse of information and make technology development
systematic. Software development criteria will also be fixed within the current
Fiscal Year.
·
Advertisement Code of Conduct will be formulated within mid-April of the
current Fiscal Year in order to make advertisement and commercial publicity
systematic and respectable.
·
Provision of advertisement of public welfare nature has been given continuity.
Appropriate institutional arrangements will be made for judicious distribution
of information to be disseminated on behalf of the Government.
XVI.
Tourism
·
It had allocated budget for the programs to bring one million tourists under
the national campaign of “Tourism Year 2011” to be
launched with the slogan of “Together with Tourism”.
·
The Government will provide Rs. 500 thousand cash to any organizer holding
meeting, seminar, workshop, or interaction program once at a time involving
more than 100 foreign passport holders entering Nepal through air- route within
7 days of completion of such programs upon submission of the evidence and
relevant documents.
·
A Strategic Master Plan will be prepared from this Fiscal Year to develop
marital ideal of Janakpur, natural beauty of Pokhara and religious attraction
of Lord Buddha’s birth place in Lumbini, as interdependent and complementary
triangular destinations for tourism.
·
To honor the resolution of the Legislative – Parliament to develop the birthplace
of Lord Buddha, pioneer of world peace, in the form of “International Peace
City” will be carried out by consolidating the area of birth place of Lumbini,
playing field of Kapilbastu, Devadaha and Ramgram by mobilizing international
assistance.
·
Property of Swargadwary will be protected and its master plan will also be
developed.
·
Continuity will be given to the completion of the detailed feasibility
study of Nijagadh International Airport. Likewise, infrastructure of Pokhara,
Gautam Buddha, and Janakpur airports will be developed to make them capable of
operating international flights. Rumjatar airport will be upgraded.
XVII.
Financial and Capital Market
·
Financial Sector Reform Program will be accorded emphasis to contribute
to the expansion of economic activities for sustainable growth and stability of
economy. Appropriate measures will be adapted to capital restructuring of Nepal
Bank Limited and Rastriya Banijya Bank.
·
Necessary capital contribution required from the Government is allocated
to Infrastructure Development Bank to be established with the participation of
the private sector.
·
Small Deposit Guarantee Program covering up to Rs. 200 thousand
initiated since last year for D Class financial institutions will be extended
to B and C. For this purpose, in this Fiscal Year, the Government will invest
additional Rs. 250 million in the Deposit and Credit Guarantee Corporation.
Authorized Capital of the Corporation will be gradually increased to Rs. 2
billion.
·
The law will be promulgated for the effective regulation and supervision
of futures and commodities' markets.
·
Investment of non-resident Nepalese in the capital market will be allowed.
·
Issuance of Foreign Employment Bond targeted at Nepalese residing abroad
will be continued.
·
Legal provisions will be made to set up credit rating agency in order to
enhance the credibility of the credit market.
·
To keep the promises made to the international communities, vigilance
and prosecution against the money laundering activities will be strengthened.
XVIII.
Quality Education for Dignified Life
·
This budget had allocated Rs. 57.65 billion for the education sector.
This allocation is 17.1 percent of the total budget and it represents an
increase of 24.5 percent compared to last Fiscal Year.
·
A total of 26,773 Child
Development Centres, established upto last year with a view to educating
children from economically and socially deprived classes will be continued. In
this Fiscal Year, budget has been allocated to add 2,000 Child Development
Centres
·
Teacher's positions will be reviewed in the current Fiscal Year through
school mapping program to ensure the sufficiency of teacher-student ratio.
·
Budget has been allocated to community schools selected for teaching
science subject for the purpose of building construction; laboratory setup as
well as school teacher for mathematics and science teaching.
·
Management of 5,400 schools will be handed over to the communities
during the current Fiscal Year.
·
Budget had proposed Rs. 1 billion for teaching grant to be distributed
among the schools facing scarcity of teachers.
·
It had made arrangement for the
grant required for the operation of the new universities proposed in the last
year's budget.
XIX.
Health: Fundamental Right of the People
·
It had proposed Rs. 24.51 billion for the implementation of the health
sector programs.
·
It had proposed to expand free of cost maternity service, currently
being provided by community as well as central hospitals under 'Safer
Maternity Program' to non-profit making health organizations.
·
The preventive and curative health services targeted at the women
suffering from prolapsed will be brought to their doorsteps through mobile
health camps.
·
Feasibility of "Health Insurance Program" will
be studied within the current Fiscal Year targeting people below the poverty
line.
XX.
Drinking Water and Sanitation
·
Construction of 8 kilometer long tunnel of the Melamchi Drinking Water
Supply Project and Lamidada Access Road will be completed during the current
Fiscal Year. Installation of water treatment plant inSundarijal will be
started. For this, the budget allocated is Rs. 2.17 billion.
·
"Rural Water Resources Management Project" will be
implemented in all districts of Seti and Mahakali zone, Humla of Karnali zone
and Dailekh of Bheri zone for supplying safe drinking water, easy toilets and
sanitation, irrigation and micor hydro..
·
Arsenic-free drinking water will be supplied in all Terai districts
including Nawalparasi.
·
Rain water harvesting projects will be encouraged.
4. The
Catalytic of Economic Growth: Private Sector and Skilled Human Resource
This budget
had sincerely appeal to the private sector for the socio-economic transformation
of the country with full confidence and zeal. It had taken following measures
in order to reduce the cost of doing business to create conducive environment
aiming at trouble-free development of private sector.
• Time
taken for tax payment has been reduced by 12 working days in a year.
• Any
manufacturing establishment providing employment for more than 100 people will
get the benefit of black topped roads reaching their premises. Besides,
electrical grids and waterline will also be provided.
• The
Government will set up a sub health post staffed with health workers to any
productive industry that offers employment for more than 500 Nepalese workers.
• The
Government will arrange a police post of 5 police personnel equipped with
weapons to any manufacturing industry that offers employment for more than 500
Nepalese.
• Import
duty to any manufacturing industry will be exempted on their importation of
equipments required to examine for the quality control of their products.
•
Manufacturing industries and hotels will get the benefit of direct purchase of
diesel form the Nepal Oil Corporation at dealer’s price, in quantity exceeding
at least one tanker at atime, for industrial and commercial uses.
•
Arrangement has been made to provide 2 percent of incentive in equivalent
Nepalese currency to exporters on submission of bank documents that they have
received convertible currencies earned from exports.
• For the
benefits of labors, Cooperative Society involving only the workers of the
enterprise will be encouraged to operate within the industrial premises.
5. Allocation and resource availability plan for the sectoral programs
Ø
Former Minister Mr. Pandey had proposed a total appropriation of Rs.
337.90 billion for the implementation of policies and programs of FY 2010-11.
Ø
Of the total appropriations, it had proposed 56.3 percent or Rs. 190.32
billion for the recurrent expenditure, and 38.3 percent or Rs. 129.54 billion
for the capital expenditure, and 5.4 percent or Rs. 18.42 billion for the repayment
of principal.
Ø Proposed
estimated expenditure is 30.4 percent higher than last year's preliminary
estimate of revised expenditure. In terms of the structure of the expenditure,
recurrent expenditure increased by 25.8 percent and capital expenditure by 44.8
percent.
Ø It had
included all expenditures made according to the Bill Empowering Government to
Withdraw Money from Consolidated Fund to carry out Regular Services and
Activities Act, 2010 which was passed by Legislative-Parliament on 12 July 2010
to the expenditures.
Ø Of the
total expenditure, it had proposed Rs. 178.61billion (52.9 percent) for development
programs and Rs. 159.29 billion (47.1 percent) for general administration.
Ø Of the
total sources of financing estimated at Rs. 281.99 billion to be required to
meet the expenditures for current Fiscal Year, Rs. 216.64 billion will be met
from revenue and Rs.65. 34 billion from foreign grants, leaving a deficit of Rs.
55. 91billion.Of the total deficit, Rs. 22.23 billion will be financed from
foreign loans, and Rs. 33.68 billion from domestic borrowings.
Ø Out of the
total revenue target, it had estimated to mobilize Rs. 19.21 billion through
changes in tax and administrative reforms.
6.
Revenue,
policy and program of the budget
Emphasis
will be given on the following policies with the objectives of leading the
country to industrialization by developing sustainable, self-sufficient and
self reliant economy through optimum mobilization of domestic resources.
a. To
expand tax net by identifying persons and sector not covered under the tax net.
b. To lead
the country’s economy to industrialization through providing protection and
promotion with special facilities to import substituting and export promoting
industries.
c. To
create an investment friendly environment by attracting domestic resources and
foreign investment.
d. To
reduce trade deficit by promoting exports.
e. To
minimize financial crimes through collection and management of information
related to revenue leakages, misuse of foreign exchange and money laundering.
f. To
enlarge the contribution of non-tax revenue as important source of overall
revenue collection.
g. To
develop revenue administration as fair, transparent, professional and
taxpayer-friendly through making timely reform in the present organizational
structure.
7.
Highlights
of current economic situation of the country
·
The Gross Domestic Product (GDP) which grew by 5.8 percent in 2007- 08
and 3.9 percent in 2008-09 is estimated to grow by 3.5 percent in Fiscal Year
2009-10.
·
The double digit inflation recorded in the last two consecutive fiscal years
has moderated to 8.9 percent in the first three months of the current Fiscal
Year.
·
Total exports, which had declined by 16.5 percent during first three months
of the previous Fiscal Year, have increased by 5.9 in the corresponding period
of this Fiscal Year. The import, which had increased by 31.9 percent in the
first quarter of previous Fiscal Year, has increased only by 3.7 percent during
the corresponding period of this Fiscal Year.
·
The number of workers on foreign employment has increased by 40 percent
in the first three months of the current Fiscal Year. The flow of remittance
has increased by 16.6 percent during the review period as compared to 11.1
percent in the first three months of the Fiscal Year 2009-10.
·
As of 12 October 2010, the total foreign exchange reserves stood at Rs 257.38
billion - the same level of the last Fiscal Year. In terms of US dollar,
however, it has increased by US$190 million.
·
As of 12 November 2010, total release and expenditures have increased by
3.4 percent and 6.9 percent respectively. During this period, total expenditures
stood at Rs 51.08 billion. Of this, current expenditure increased by 6.7
percent to Rs 35.91 billion and capital expenditure by 11.1 percent to Rs 3.81
billion.
8.
Major
challenges of the economy
8.1 Economic Activities
The
economic growth rate is less likely to be encouraging in FY 2010/11 with GDP
growth estimated at 3.5 percent against the target of 4.5 percent. According to
revised estimate, GDP in producers' price in the previous fiscal year grew by
4.5 percent. Such decline in GDP as against the target is due to the slow
economic activities in the non-agriculture sector. Labor problems, inadequate
electricity supply, less expansion of bank loans, sluggish remittance flow, and
delayed government budget had adverse impact on the expansion of economic
activities of non-agriculture sector.
8.1.1 Agriculture Sector
·
In the current fiscal year 2010/11, agriculture sector is estimated to
grow by 4.1 percent. Such growth rate was estimated at 1.3 percent in the
previous fiscal year while the average growth rate in the last five years
remained at 3.0 percent. This subsector is expected to contribute 34.9 percent
to the GDP in current fiscal year. Such contribution remained at 34.7 percent
in previous fiscal year. Contribution of this sector to GDP is expected to rise
nominally in the current fiscal year as a result of the satisfactory
improvement observed in the production of this sector.
·
Preliminary estimates for FY 2010/11 show that paddy production among
the major food crops under the agriculture sector will grow by 11.0 percent to
4.46 million metric tons. The major reason behind increase in production of
this crop is the favorable monsoon period. It is estimated that the area under paddy
cultivation has increased marginally by 1.0 percent in the current fiscal year.
Likewise, amongst the other monsoon crops, maize production is estimated to
grow highly by 11.5 percent reaching 2.06 million metric tons while millet
production is expected to grow only by 1.0 percent.
8.1.2 Fisheries
·
According to preliminary estimates, the fisheries sector will grow by
6.8 percent in the current fiscal year 2010/11 as compared to the previous
fiscal year. The sector recorded a 3.9 percent growth in the previous fiscal
year. This sub-sector has attained an average annual growth rate of 5.3 percent
for the last five years.
8.1.3 Non-Agricultural Sector
·
The growth rate of the non-agriculture sector in the fiscal year 2010/11
is estimated at 3.1 percent. This is slightly lower as compared to the growth
rate of 5.4 percent attained in the previous year. The shortage of energy
supply, weak monetary expansion, and delayed government budget has been the
major factors affecting the growth rate of non-agriculture sector. As per the
preliminary estimate, the growth rates of two subsectors including gas and
water supply and wholesale and retail business sub-sectors will remain negative
(negative by 4.0 percent and 0.2 percent) in the current fiscal year. According
to estimates, industry, hotel and restaurant, transport, warehousing and
communication, financial intermediation and health and social work subsectors
are expected to grow in the current fiscal year than in the previous year while
growth rates of other subsectors under non-agricultural sector are expected to
fall.
8.1.3.1 Mining and Quarrying
·
As per the preliminary estimate, various sub-sectors among
non-agricultural sector, mining and quarrying sector that recorded growth by
3.1 percent will grow by 2.1 percent in the current fiscal year. The average
growth rate of this sub-sector remained at 2.6 percent in the last five years.
The effect experienced in this year due to the control in the exports of gravel
and sand has reflected in the production of this sector.
8.1.3.2 Manufacturing
·
The growth rate of production of manufacturing sub-sector that had been sluggish
since last few years is expected to be normal with its production estimated to
grow by 1.5 percent in FY 2010/11 as compared to 1.2 percent growth in the
previous fiscal year. As per the Industrial Production Index, growth rate of
this sector is expected to remain just about normal due to reduction in the
production of goods such as mustard oil, biscuits, beer, soft drinks, jute,
leather, papers and paper made products, plastics, concrete and hum pipe, iron
rod, GI Pipes, electrical wires despite satisfactory growth rate of goods such
as mustard oil, rice, wheat flour, readymade garments, lube oil, paints,
medicines, soap, bricks. The average growth rate of this subsector recorded to
be very marginal (0.3 percent only) for the last five years. As a result, the
contribution of this sub-sector that was 9.0 percent to GDP in 2004/05 reduced
to 6.5 percent in FY 2010/11 at constant price of FY 2000/01.
8.1.3.3 Electricity, Gas and Water Supply
·
In comparison to the previous fiscal year, production of this sub-sector
is estimated to decline by 4.0 percent in the current fiscal year. This sector
had recorded a growth of 5.4 percent in the previous year. Although this
sub-sector has recorded an average annual growth of 2.4 percent for the last
five years, it's contribution to the aggregate GDP has not increased
significantly.
8.1.3.4 Construction Sector
·
The growth rate of this sub-sector is estimated to be at 3.3 percent in
the current fiscal year 2010/11 as compared to 5.0 percent of the previous
fiscal year. The growth rate of this sector is expected to decline in this
current fiscal year as a result of the cautiousness adopted by banks and
financial institutions on issuing loans for residential and commercial building
construction, housing, increment in the interest against loan and inadequate
increment in government’s capital expenditure. This sub-sector has recorded
average growth rate of 3.4 percent in the last five years contributing 6.0
percent to the GDP in an average.
8.1.3.5 Wholesale and Retail Trade
·
Growth rate of this sub-sector is expected to decline by 0.2 percent.
This figure stood at 6.7 percent in the previous year. There was significant
decline in import trade’s growth rate in the current fiscal year whose impact
is apparent on this sub-sector. Though the contribution of this sub-sector is
highest among other sub-sectors of non-agricultural sector to GDP, the average
growth rate has been 2.1 percent for the last five years.
8.1.3.6 Hotel and Restaurant
·
According to preliminary estimates, this sub-sector will attain
satisfactory growth of 7.4 percent in its production in the fiscal year
20010/11. Such growth rate was 7.2 percent in the previous year. The hotel and
restaurant sub7 sector felt positive impact of GDP due to the comparative
improvement in peace and security situation since last few years and notable
improvement in tourism sector as a result of decreased number of closures and
strikes. Despite average growth rate of 5.5 percent of this sub-sector in the
last five years, its contribution to GDP has been less than 2.0 percent.
8.1.3.7 Transport, Communication and
Warehousing
·
Growth rate of this sub-sector during the current fiscal year 2010/11 is
estimated at 7.1 percent. This sub-sector had recorded satisfactory growth (i.e.,
6.1 percent) in the previous fiscal year. Growth is expected to rise in this fiscal
year than that of previous fiscal year due to the declined in closures (Bandhs).
This sub-sector has achieved significant growth rate of 6.9 percent in average
with an average of 9.1 percent contribution to the GDP.
8.1.3.8 Financial Intermediation
·
This sub-sector is expected to record its production growth of 3.9
percent in the current fiscal year. This figure stood at 2.8 percent in the
previous fiscal year. Financial intermediation sub-sector has average growth
rate of 5.9 percent in the last five years. This sub-sector has been making
significant contribution, directly or indirectly to the economic development of
the country.
8.1.4 Real Estate, Rent and Commercial
Services
·
This sub-sector is estimated to achieve the growth rate of 2.6 percent
in the current fiscal year. This sub-sector had achieved growth rate of 3.6
percent in the previous year. Due to the policy arrangements made by Nepal
Government to manage unusual price hike on land and buildings and their
transactions, the growth rate of this sub-sector is expected to receive nominal
decline. This subsector has achieved an average growth rate of 6.1 percent in
the last five years with an average contribution of 8.2 percent to the GDP.
8.1.5 Public Administration and Defense
·
As per the preliminary estimate, Public Administration and defense subsectors
will have production growth rate of 3.0 percent. Such growth rate for the
previous fiscal year was 4.4 percent. As per an estimate based on budgetary allocation
and expenditure on public administration and defense of Central Government,
this sub-sector's growth rate will be lower than that of previous year.
Likewise, the growth rate of this sector has remained at 3.3 percent on an average
in the last five years.
8.1.6 Education
·
In the fiscal year 2010/11, the output of this sub-sector is estimated
to grow by 2.9 percent. This sub-sector had achieved growth rate of 7.3 percent
in the previous fiscal year while this growth rate is expected to decline in
this current fiscal year. This was estimated on the basis of government’s
expenses on education sector and the indices that have been identified after changes
in educational activities of private and non-government sector. The growth rate
achieved by this sub-sector over the last five years has remained encouraging, averaging
6.9 percent with 6.3 percent contribution to GDP during this period.
8.1.7 Health and Social Works
·
The outputs of this sector are expected to grow by 5.9 percent in the
current fiscal year 2010/11. Such growth rate was recorded to be 4.3 percent in
the previous fiscal year. Production of this sector is expected to rise due to budgetary
allocation made for government’s health sector, increased expenditures and
expanded private health services. The average growth rate stood at 6.9 percent
in the last five years.
8.1.8 Other Community, Social and Personal
Services
·
As per the preliminary estimate, the growth rate of this sub-sector will
stand at 8.6 percent which is highest among the other sub-sectors of GDP. This
subsector had achieved the highest growth of 11.8 percent in the previous year.
This sub-sector comprises community services, other social and business services
provided by the government. This sector has been able to achieve highest growth
rate (average 12.4 percent) during last five years.
8.1.9 Sectoral Details
·
Based on analysis of the growth trend by classifying GDP in major three sectors
( primary, secondary and tertiary), the growth rate of primary sector comprising
agriculture and forest, fisheries and mining and quarrying is expected to
remain high in current fiscal year as compared to the figures of last three
years. The growth rate of this sector is expected to stand at 4.1 percent compared
to 1.3 percent of the previous fiscal year. Likewise, the growth rate of
secondary sector (Industrial Production, Electricity, Gas, Water Supply and Construction)
is expected to remain at 1.4 percent in the FY 2010/11. Such figure stood at
3.3 in the previous fiscal year. Likewise, service related a subsector under
tertiary sector is expected to grow by 3.6 percent. This sector had achieved
satisfactory growth of 6.0 percent in the previous fiscal year.
8.1.10 Consumption
·
While analyzing expenditure based GDP structure, the consumption expenditure
has climbed to 93.3 percent from 88.3 percent within a period of 2000/01 to 2010/11
through a growth of 5 percentage points. The share of gross fixed capital
formation during this period fell from 19.2 percent reaching
·
Percent with a reduction of 1.2
percentage points. Net export of goods and services as a share of GDP (balance
after deducting imports from exports) in FY 2000/01 rose almost by 2 folds from
the negative 10.7 percent reaching at negative 23.6 percent in FY 2010/11 1.32
On the consumption side, share of private consumption in GDP increased by 2.6 percentage
points to 81.6 percent during the period of 10 years (FY 2000/01 to 2010/11).
While during this period government consumption increased by 2.0 percentage
points to 10.2 percent. In the current fiscal year, the shares of private and
government sectors in total consumption is estimated to be 87.5 percent and
·
Percent respectively while non
profit making organization hold the remaining share. The share of domestic
consumption on GDP has increased by 1.0 percent reaching 86.6 percent in this
year. The rise in such consumption is mainly due to the increased remittance
inflow and price hike.
·
Likewise, the share of net investment on GDP in FY 2010/11 is estimated
to reach at 30.2 percent where as the share of fixed capital formation is 18.0 percent
and the share of change in stock (including statistical error) has been 12.2
percent. The shares of private sector and government sector on net fixed capital
formation stood at 78.8 percent and 21.2 percent respectively.
·
After the publication of new series of GDP, share of export of goods and
services in GDP during the FY 2010/11 has declined by 1.0 percentage points
reaching 32.2 percent. Such ratio is less than 5.0 percentage points as
compared to that of previous year. Likewise, the share of export of goods and
services is expected to decline by 14.0 percentage points to 8.7 percent from
22.6 percent. Such ratio is less by 1.0 percentage points than that of previous
fiscal year.
·
The total consumption is expected to rise by 5.4 percent in the price of
the FY 2000/01 to Rs. 653 billion in the current fiscal year as compared to the
previous fiscal year. Of this, consumptions of government sector and private sector
are expected to grow by 10.6 percent and 4.9 percent respectively. Total consumption
stood at Rs 620 billion in the previous fiscal year. Among the total
consumptions, the share of government consumption is expected to reach 10.8
percent in the current fiscal year with the nominal increment from 10.1 percent
than that of previous fiscal year. Looking at the structure of GDP, the share
of the consumption of food of the private sector in the fiscal year 2010/11 is
54.0 percent, 31.6 percent on non-food items, and 14.4 percent on services.
Similarly, of the total private sector consumption of GDP in the previous year,
shares of food grains, non-food items and services were 55.0 percent, 31.3
percent and 13.7 percent respectively. It shows that there has been no
noticeable change in the consumption structure of the private sector during
last two years with food items occupying major share in total consumption.
8.1.11 Savings
·
In the current fiscal year 2010/11, the gross domestic savings is
expected to reach Rs 89.64 billion at current price with a growth of 3.5
percent. Such saving had decreased by 6.9 percent in the previous fiscal year.
The ratio of savings with GDP was recorded 7.4 percent in the previous fiscal
year while this ratio is expected to decline to 6.7 percent in the current
fiscal year 2010/11. Saving ratio has declined in the current fiscal year due
to high expenditure on consumption. The current rate of saving is lowest during
the last eleven years. Likewise, the growth rate of national saving is
estimated to be 10.1 percent in 2010/11 and ratio to GDP is 30.9 percent. The
national saving rate is lowest in the past four years.
8.1.12 Capital Formation
·
In fiscal year 2010/11, gross capital formation at current price is
expected to decline by 0.9 percent with the growth of 2.5 percent in gross
fixed capital formation. As per the preliminary estimates, the share of gross
capital formation and gross fixed capital formation to GDP is estimated to be
30.2 percent and 18.0 percent respectively in current fiscal year. It was 35.0
percent and 20.2 percent respectively in the previous year.
·
In FY 2010/11, the shares of gross capital formation and gross fixed
capital formation are expected to remain 24.0 percent and 16.2 percent
respectively in GDP at constant price. The share of gross fixed capital
formation is less by 2.5 percentage points as compared to the previous fiscal
year. The growth rate of such capital formation at fixed price is expected to
decline significantly by 10.4 percent. The gross fixed capital formation that
increased by 5.3 percent in the previous fiscal year had stood at 18.7 percent
of GDP. The share of fixed capital formation in gross capital formation is 67.5
percent while the share of change in stock (including statistical error)
accounts for 32.5 percent in current fiscal year. The share of change in stock
at constant price is estimated to be 7.8 percent of GDP. Out of the gross fixed
capital formation in the fiscal year 2010/11, the share of government sector is
21.2 percent and that of the private sector is 78.8 percent. In the previous
year the share of public sector was 21.8 percent while that of the private
sector was 78.2 percent. This figure suggests that the government sector
participation is likely to face slight decline in fixed capital formation in
the current fiscal year.
8.1.13 Net Exports of Goods and Services
·
The GDP share on the net exports of goods and services accounts for 32.2
percent at the current price in the current fiscal year. Such share remained at
37.4 percent in previous fiscal year. The share of exports of goods and
services to GDP recorded lowest at 8.7 percent in the current fiscal year
2010/11. Due to the decline in the growth rate of imports, the net export of
goods and services deficit is expected to be 23.6 percent in GDP. Such deficit
was 27.7 percent of GDP in the previous fiscal year.
·
It is estimated that the import of goods and services at constant price totaled
Rs 236.12 billion and exports worth Rs 67.71 billion during the current fiscal year
2010/11. As a result, the trade deficit is expected to stand at Rs.168.41 billion
at fixed price in the current fiscal year. According to Central Bureau of Statistics,
the trade deficit that rose by 55.9 percent at constant price in the previous
fiscal year is expected to fall by 3.6 percent in the review period. The exports,
imports and trade deficit ratios with the GDP in current fiscal year at the
price of FY 2000/01 are 10.6 percent, 37.0 percent and 26.4 percent respectively.
Such ratios in the previous year stood at 11.4 percent, 39.7 percent and 28.3
percent respectively.
8.1.15 Gross National Disposable Income
·
Nepal has been experiencing continuous growth in remittance inflow since
last few years and as a result its disposable income has continued to rise as
well. The total source of income available to spend within the country is
defined as Gross National Disposable Income (GNDI). At the current price, the
GDP and Gross National Disposable Income are expected to grow by 14.9 percent
and 14.3 percent respectively in current fiscal year 2010/11. Such growth rates
were recorded 18.6 percent and 17.2 percent for GDP and Gross National Disposable
Income in the previous fiscal year. The Gross National Disposable Income in
current fiscal year is estimated to be 124.3 percent of GDP. Based on proportion of GNDI, consumption out
of gross national disposable income appears to be 75.1 percent with a gross
national saving of 24.9 percent. These proportions in the previous fiscal year
were 74.1 percent and 25.9 percent respectively. Observation of the growth
trend indicates that Gross National Disposable Income, consumption and savings
may decrease in the fiscal year 2010/11 as compared to its preceding year. Due
to the higher growth rate of gross consumption than that of gross disposable
income, the saving growth rate is estimated to experience more decline.
·
National Accounts Statistics also provides insight into the distribution
of income status of various sectors involved in national production. Looking
from this perspective, out of the gross disposable national income, labors
receive 28.7 percent as salary allowance and wages while the business community
shares 44.2 percent as profit or mixed income. Similarly tax excluding donations
covers 7.6 percent and net transfer income occupies 19.1 percent of gross
national disposable income while a negligible proportion of this income comes
from net factor income. Of the gross national disposable income of FY 2000/01,
salaries of laborers occupied 39.1 percent, 42.2 percent was that of income of
business communities while 12.9 percent was the share of transfer income. Thus
the share of laborers has declined while the shares of business communities and
transfer income have grown in the gross disposable income during this 11 years
period.
8.2
Public
Finance
8.2.1 Structure of Government Finance
·
The total expenditure of Nepal Government in the fiscal year 2009/10 was
Rs. 259.69 billion. Of this, 58.2 percent was recurrent, and 34.7 percent
capital expenditure while 7.1 percent accounted for repayment of principal.
Looking at the expenditure trend of the past years, the share of recurrent expenditure
in total expenditure remained close to 60 to 62 percent between fiscal years
2002/03 and 2005/06 while such ratio has declined in subsequent years. This is
a positive sign from the expenditure’s point of view. The share of capital
expenditure in total expenditure was about 26 percent between fiscal years
2002/03 and 2005/06 while it showed increasing trend in the subsequent years. Similarly,
revenue mobilization covered about 63 to70 percent of the total expenditure
between fiscal years 2002/03 and 2009/10. During this period, gross revenue
grew by 18.5 percent, while average growth rate of gross expenditure stood at
17.8 percent.
8.2.2 Grants and Loan
·
The total committed foreign aid in the first eight months of the current
fiscal year 2010/11 stood at Rs. 72.93 billion which is less by 4.9 percent as
compared to the corresponding period of the previous fiscal year. Of the total
committed foreign aid, foreign grants constituted Rs 42.64 billion (58.4
percent of the total aid) while foreign loan stood at Rs.30.32 billion (41.6
percent of the total aid) in the review period. Out of the total foreign aid of
Rs.76.73 billion committed during the first eight months of the fiscal year
2009/10, grant constituted Rs 58.34 billion with its share contribution of 76.0
percent and loan Rs.18.39 billion with 24.0 percent share contribution to the
total aid.
8.2.3 Commitment and Utilization
·
In the first eight months of the fiscal year 2010/11, the share of
bilateral assistance among the total commitment was 34.3 percent while that of multilateral
assistance was 65.7 percent. In the same period of the previous year, shares of
bilateral and multilateral assistance were 41.0 percent and 59.0 percent
respectively. While analyzing sector-wise foreign aid commitment in the first
eight months of the current fiscal year 2010/11, the share of electricity
sector was Rs.7.18 billion (15.4 percent), education 9.11 billion (12.5
percent), and rural development Rs.4.19 billion (5.7 percent). Similarly,
drinking water and sewerage shared Rs.5.47 billion (7.5 percent) agriculture,
irrigation and forestry sector Rs 2.7 billion (3.7 percent), transport and
communication Rs.11.27 billion (15.4 percent), health Rs.16.96 billion (23.3
percent) and other sectors Rs.14.96 billion (20.5 percent).
8.3 Price and Supply
8.3.1 Structure of Inflation
·
The higher demand caused by monetary expansion exerts extra pressure on
price situation. On the other hand, supply and cost related causes also affect
the price level. The price hike in many situations could be the result of both
factors or either of these two. Several studies reveal that factors including
production and supply situation in Nepal, foreign trade structure, exchange rate
and structural arrangements play vital role in price rise. However, excessive
monetary expansion has been obvious reason to exert additional pressure on the
price of both tradable and non-tradable goods. Looking at the monetary
expansion and price situation, the recent inflation is not due to monetary expansion
but largely due to structural and external factors. Weak industrial production,
closures, strikes, load shedding, excessive price rise in foods and petroleum
products and Indian inflation have contributed for the price rise. Recent price
hike in countries including China and India have also been a great concern. Due
to the increase in the price of food grains and petroleum products as a result
of conflict in middle-east and North African countries, most countries
including Nepal have been experiencing excessive pressure on consumer price.
Nepal has been facing a double-digit inflation since last two years. In this
context, CPI based point to point annual inflation has still remained in double
digits until the mid-march of the current fiscal year. Price situation is less
likely to improve in the current fiscal year as prices of petroleum products
and food grains have continued to rise.
8.4 Money and Banking
8.4.1 Monetary Policy
·
Nepal Rastra Bank has been regularly formulating the Monetary Policy since
2002/03 as per the legislative provision of Nepal Rastra Bank Act 2002 every
year. The policy includes subject matters such as credit, foreign exchange,
micro-finance, regulation and supervision of banking sector. Monetary policies
announced so far have given high priority especially to internal stability
(price stability and financial sector stability) and external stability
(favourable balance of payments) as their main objectives. In addition,
Policies and Programs are designed with priority accorded to other objectives
as mentioned in Nepal Rastra Bank Act. Monetary Policy of Financial Year
2010/11 and its Mid Term Evaluation were made public on July 27, 2010 and March
3, 2011 respectively.
·
Monitory Policy was formulated for FY 2010/11 giving due consideration
to issues such as low economic growth situation, double digit inflation, high
deficit on balance of payment, monitory constraint felt in Nepalese economy in
the subsequent years, stability in financial system, productive utilization of
credit, enhancing financial accessibility and credit guarantees. Likewise the
policy had the strategy to provide support to achieve economic growth as
envisaged by Three- Year Plan by securing overall economic stability in the
country.
·
Monetary Policy was brought into implementation in the fiscal year 2010/11
amid challenges such as risk seen in external sector’s stability due to balance
of payment deficit, diversion of bank credit flow towards unproductive sectors
due to existing unfavorable investment situation, monitory pressure, riskier
situation in maintaining fiscal stability due to growing number of banks and
financial institutions, possibility of capital flight and low motivation on
saving due to lower interest rate and financial inaccessibility to rural
sectors.
8.5 Transport and Communication
8.5.1 Road Transport
·
By the end of FY 2009/10, a total of 6,669 km blacktopped, 5,007 km
graveled and 9,417 km earthen road totaling 21,093 km roads were constructed.
By the end of mid-March of FY 2010/11, a total of 205 km blacktopped and 29 km
gravelled roads were upgraded while 128 km new roads were constructed.
Accordingly, the total length of road to date is estimated to have reached
21,455 km. As per the target of connecting Manang district headquarters with motor
able road, construction works are in progress.
Conclusion
The
budget has put forward public-private partnership and cooperatives as models
for a transition economy. The priority areas of the budget are rural
infrastructure, tourism and water resources. The budget has included every
sector, and I think it was designed in a way that it might be implemented
successfully but due to the uncertain political situation of the state create
the unfavorable condition. The budget allocations will be scattered in
different sector and this will have short-term benefit as the state’s mechanism
cannot expand the allotted budget. Expansion allocation by revenue is over
ambitious.
I
think the government is failed to establishing a separate Industrial Security
Force, rehabilitation of Maoist combatants, modernization of the national army,
providing social security to disadvantaged groups, full compensation to
conflict victims, reconstruction of infra-structure damaged during the
conflict. The government is also unable to control the malpractices in the
market (to interment the market). Now, due to the global financial recession in
the world, there is deflation and decrease in the price of the entire commodity
but however in Nepal there is high level of inflation and it is undesirable. In
my opinion this budget could not be succeeded in the following sector as given
below:
·
Agriculture has been making notable contribution to the economy. Despite
decline in its contribution of agriculture to GDP, its share is still more than
two third. Agriculture production still remains erratic due to high dependency
on monsoon owing to weak irrigation facility. Area under paddy cultivation,
which has been contributing around 7 percent to GDP, is less than what it was
10 years ago while its production has increased merely by 5.8 percent (average
annual growth of 0.5 percent) during this period. Likewise, statistics has
shown that per hectare productivity of this crop is higher by 1.0 metric ton in
areas with access to irrigation facility than in non-irrigated land. Hence,
emphasis on developing agricultural infrastructure including irrigation is
utmost necessary for raising the productivity of agriculture sector including
the yield of major food crops and commercialization of this sector.
·
Industry sector is on the continuous downslide. Industrial output is
moving toward hopeless situation in absence of investment-friendly environment
owing to a number of factors including political instability and lack of peace
and security, energy crisis, and labor relations etc. This sector’s GDP growth
rate over past 10 years averaged only to 0.3 percent. Contribution of this
sector from 9.0 percent in FY 2000/01 has slipped to 6.5 percent in FY 2010/11.
Hence, raising the level of output and employment of the industry sector by
attracting domestic and international investment through creation of
investment-friendly atmosphere has become another challenge.
·
Another big challenge is the extreme energy crisis the country is
facing. Failure to match the demand for electricity with production and supply
has adversely affected all sectors including industry and the people of all
walks of life like a housewives and students for example. This situation has
adversely affected industrial production and production costs leading to
deterioration of overall productivity of the country. Current priority of the
country, thus, is to produce and supply electricity as per the demand through
rapid development of hydropower by raising the level of investment in this
area.
·
Millions of youth are compelled to heading for overseas seeking
employment due to failure in creating employment opportunities within the
country. Statistics for the last three years shows on average 250,000 people
leaving the country annually for foreign employment, and the number is on rise.
Although foreign employment remains a major source of foreign currency for the
country, in the long-run it could fall in the remittance trap. It is another
challenge of engaging the youths in the nation’s development by creating
employment opportunity within the country itself.
·
The country is facing higher price rise since last two years with 13.2 percent
and 10.5 percent hikes in FY 2008/09 and 2009/10 respectively. Inflation rate
is expected to remain higher even in this year with a steady point-to point price
rise of 10.7 percent during first eight months of the current fiscal year.
Although developed and emerging economies are also encountering the pressure of
price rise, rate of inflation in Nepal is higher in comparison to those
countries. Low economic growth rate accompanied by continued double digit
inflation has been adversely affecting economic activities and the people’s livelihood.
Although, a number of causes of price rise are beyond control, today’s
challenge is to contain the price rise by improving the supply through proper
demand management.
·
Higher price rise of food and beverage group of items is the major cause
of higher rate of consumer inflation. Price of this group rose by 17.3 percent
during first eight months of the current fiscal year. Prices vegetables and
fruits in this group rose excessively in the review period with 73.1 percent
rise in the price of Vegetables alone that carry the weight of 5.7 percent in
the price index. There has been a rapid price rise of food items globally.
Development of Agriculture sector, especially increasing vegetable production
and developing storage facilities is posing challenge to us.
·
It is utmost necessary curbing all those kinds of undesired activities
like monopoly and cartels, black market for creating artificial shortage of
goods and commodities etc. that create hurdles in the smooth supply of
essential goods. On the one hand it is necessary to completely curb the
syndicate system on public transports and transportation of goods, and properly
mobilize the cooperative institutions of the country for facilitating the
supply of essential goods.
·
This budget may not succeed to narrow the ever widening poverty gap
between the rich and the poor with implementation of poverty reduction measures
is a complex national issue at present.
·
Employment opportunities could not be created for the 400,000 labor
force added annually in the labor market. Opportunities for entrepreneurship,
quality skill development, and creation of employment opportunities are
dismally low in the country. Harmony could not be established between demand
and supply for labor force.
·
There exist a number of challenges in the industry sector, namely:
timely accomplishment of the policy, legal and structural reforms necessary for
discharging the trade liberalization responsibility resulting from the regional
and industrial trade affiliation; gain international confidence in Nepal’s
exportable products by retaining their quality and standard; and establishing
·
Some of the problems adversely affecting the agricultural production
are: the farmers failing to collect improved seeds; their inclination towards
the use of hybrid seeds of vegetables and other commodities except for food
crops; and imports of low-priced, sub-standard seeds. Additional challenge is
the inadequate availability of subsidized fertilizers in the context of
imbalance between supply and demand forecast for fertilizers.
·
The tourism sector requires special emphasis while keeping in mind the
effects of this sector on various economic activities of the county, and its
role in foreign exchange earnings. For this, there is a need of conservation
and expansion of the existing touristic locations with adequate publicity; and
promotion of tourism through exploration, identification and expansion of new
touristic sites. It remains a challenge of developing the country as a tourist
destination by raising the number of the arrival of tourists by air, and
extending their stay period.
·
Major challenges the education sector is confronting are: lack of
permanency of supporting workers in child development centers; weakness in
management of the center in absence of ownership of the community; lack of
educational materials; lack of coordination; ineffective monitoring and
evaluation; delay in the selection of schools at the district level under the
physical infrastructure improvement program for schools accompanied by delay in
submission of the completion report; lack of accurate data despite the policy
provision for availing scholarships to children in regards to free education to
the poor; and difficulty in addressing the increased demand for scholarship
with boarding facility for economically weak students.
·
Due to difficult geographical terrain, making provision for easily
accessible health facilities to the people of remote rural areas of the country
pose difficulty and challenge. The health problem is found taking horrific turn
especially in the remote rural areas due to carelessness arising from lack of
the health sanitation and awareness, and (dogmatically) superstitious
tradition. It is a challenge of sending the private sector run urban centered
health institutions and doctors to remote areas by convincing them to serve the
rural people with the service motive. Besides, MDG target on fight against
HIV/AIDS, Malaria and other diseases could not be achieved as expected.
References
http://www telegraphnepal.com/newsdet.php?newsid=4113
- 52k.Retrived:
15 May 2011.
http://www.ecantipur.com.
Retrived: 15 May2011.
http://www.nepalitimes.com.np
Retrived: 15 May 2011.
http://www.Nepalisamachar.com. Retrived:15 May 2011.
http://www.Nepaliliterature.com.
Retrived:17 July 2011.
http://www.sagarmathatv.htm
MOF.2009. Budget
Speech of Fiscal Year 2010-11.
Nepal Government. Ministry of Finance, Kathmandu, Nepal.Available on http://www.mof.gov.np. Retrived: 15 May 2011.
MOF.2010. Budget Speech of Fiscal Year 2010-11. Nepal Government. Ministry of
Finance, Kathmandu, Nepal.Available on
http://www.mof.gov.np. Retrived: 15 May 2011.
MOF.2010.Economic Survey: Fiscal
Year 2010/2011. Nepal Government. Ministry of Finance, Kathmandu, Nepal.
MOF.2011.Budget ko Madhyabadhik Mulyankan Pratibedan.Nepal Government.Ministry of
Finance,Kathmandu,Nepal.Available on
http://www.mof.gov.np. Retrived: 15May2011.
Subscribe to:
Posts (Atom)