Lowered Expectations
Post conflict euphoria seems to have died down as Finance Minister is compelled to lower the GDP growth estimates
By SANJAYA DHAKAL
Even as India and China continue to grow in double-digit rate – frequently readjusting their estimates – Nepal sandwiched between the two Asian giants has been unable to reap benefits from the cessation of armed conflict.
As the end of Maoist conflict has not translated into much anticipated peace dividends, the Finance Minister Dr. Ram Sharan Mahat has announced that the government is formally lowering its expectations of GDP growth from 5 percent to 3.8 percent this fiscal year.
Presenting his mid-term evaluation report of this fiscal year’s budget to the interim parliament, Dr. Mahat said the government has lowered the GDP growth estimates by 1 percent owing to “non-economic reasons” (read instability, strikes, bandhs etc).
In the report, the Finance Minister has estimated that the GDP will grow by only 3.8 percent – down from 5 percent projection he made when he unveiled the budget for the fiscal year 2006/07 six months ago.
The Finance Minister has pointed out to the decrease in agricultural growth rate as the major reason for the lowered estimation. The budget had estimated the non-agriculture sector to grow by 6 percent, and agriculture sector by 3.5 percent.
However, the mid-term evaluation points out that the agricultural sector would grow merely by 0.7 percent while the non-agricultural sector would grow by 5.7 percent. The revenue growth, on the other hand, is said to have increased handsomely. It has grown by 19.7 percent in the first six months of the current fiscal year to reach Rs 37.8 billion.
The volume of foreign assistance, however, has been received lesser than expectation. Till now, the government has received Rs 10.54 billion as grants and Rs 3.18 billion as foreign loan.
During his recent visit to Nepal , Managing Director of the World Bank Graeme Wheeler had to appeal to the political actors to cast their attention also on development agendas. Speaking at a press meet at the end of his three day visit to Nepal on Friday, Wheeler said, continuation of reforms with due investments for social sector development is one of the powerful ways for Nepal to achieve sustainable development. He stressed the need of rapid investment in infrastructure development, power generation and distribution and speed up economic and labor reforms.
Wheeler added WB would support the government towards the building of new Nepal and urged the latter to clearly set development goals, which he said would make it more easier for development partners to come up with their assistance.
Likewise, the revised estimates have put the recurrent expenditure at Rs 88.14 billion – up from Rs 83.76 billion that was mentioned in the budget. The capital expenditure, on the other hand, has been revised at Rs 38.22 billion – down from Rs 44.97 billion.
At a press meet organized last week to reveal the mid-term evaluation report, Dr. Mahat said, “We have seen weak progress in some areas of budget implementation. But these things are due to non-economic reasons.”
In his budget, Dr. Mahat had increased the direct cash support to the Village Development Committees (VDCs) from Rs 500,000 to Rs One million a year. But six months after the budget was announced, the local bodies are yet to be in place.
The recurrent expenditures were increased due to added liabilities in non-productive sectors like the cost of distributing citizenship, management of Maoist camps, election activities and so on.
TERAI UNREST COSTS RS 29 BILLION
The three-weeks-long Terai unrest has caused immense losses to the socio-economic sector as well. The unrest not only claimed the lives of 29 persons – as claimed by the government – but also led to losses to the tune of Rs 29 billion – around 20 percent of the country’s annual budget.
The Federation of Nepalese Chamber of Commerce and Industry (FNCCI) has stated in its white paper issued last week that the unrest led to complete stoppage of economic activities. Over 1000 industries, tens of thousands of shops and business enterprises, custom points and transport system were closed down.
The FNCCI has asked the government to compensate all the victims and provide relief to the business community. It estimates that loss on exports stands at Rs 2.5 billion, while the imports loss is estimated at around Rs 7.45 billion.
Revenues were lost and goods were trapped at transit points and even in Kolkata port. According to FNCCI, over 1000 containers including 500 at Birgunj customs, 400 at Rani-Jogbani and 100 at Kakarvitta were stranded during the period with raw material and finished products worth Rs 2 billion. The demurrage charge for the stranded containers is estimated at six million rupees.
The loss of transportation sector has been calculated at Rs 200 million, while the losses due to destruction of physical infrastructure and properties are yet to be calculated.
