Hard Preparations
Finance Minister says he is overwhelmed by demands on unproductive sector
By SANJAYA DHAKAL
It is an unusual time. There is no debate on that. Obviously, Finance Minister Dr. Ram Sharan Mahat is also faced with unusually high demands for unproductive expenses as he prepares the budget for coming fiscal year 2007/08.
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Dr. Mahat: Weight down by demands |
In an uncharacteristic exasperation, Finance Minister Dr. Ram Sharan Mahat came out in public stating that he has been overwhelmed by the huge demands of budget on unproductive sector.
"If I prepare the budget by accommodating all those demands, it could cross Rs 200 billion," said the minister.
All kinds of people including political representatives, Maoists, local bodies and others have made big demands. "We cannot bear such huge demands," he said.
This year, the budget is definite to become unbalanced as the government cannot escape spending on some unproductive sectors. "The budget will look like an overweight person - with skinny legs to support the inflated body," said an economist. And like in human physique, obesity is equally harmful in national economy.
There are some totally unavoidable expenses – such as the need to spend billions of rupees on managing the Maoist People's Liberation Army (PLA), spending on Constituent Assembly elections and the possible increase in expenditure on salaries to government employees.
These apart, the ever-increasing bill of petroleum import have also bled the national coffer. Shortage of petroleum products have worsened once again after the sole supplier Indian Oil Corporation (IOC) has stopped supplying on credit. "It is supplying only that quantity of oil for which we make the cash payment," said Umesh Dahal, deputy executive director of Nepal Oil Corporation (NOC). The IOC has put forth two conditions to NOC for normal fuel supply – full payment of current supplies and monthly installment payment of Rs 240 million to clear back dues worth Rs 4.48 billion.
As there are no signs of decrease in fuel price in international market and as domestic political leaders are scared of increasing the market price fearing the public backlash, the unnaturally low price of fuel that NOC is compelled to fix is eating up the financial fundamentals of the country. Worse, the political leaders have clearly said that they will not adjust fuel price till the elections. They have openly aired their fear that any decision to hike fuel price could be exploited by rogue elements to create anarchy and unrest.
Dr. Mahat has already said he was weighed down by huge demands for budget for the purpose of Constituent Assembly (CA) elections. He said, "Normally we used to spend around Rs 1 billion during past general elections. But this time you cannot imagine how much the demands have increased."
Dr. Mahat said that the Election Commission (EC) alone has demanded Rs 2 billion while police have demanded Rs 5 to 6 billion for providing security.
The FM said he was planning to finalize this year's budget within the total outlay of Rs 175 billion.
Adding to the woes of FM, the anti-graft body has filed case of corruption against governor of central bank throwing the financial sector reforms program off-track. And this reform program is one of the major conditions based on which donors like World Bank can agree to provide budgetary support.
The huge increase in demands for spending has come despite the fact that the pace of spending has not increased correspondingly.
A recent report showed that the budget allocated for local development could not even be half spent due to lack of mechanism to manage the local bodies. Till the completion of 11 months of the current fiscal year, only 47 percent budget could be spent. Last year's budget had allocated Rs 8.19 billion to Local Development Ministry of which only Rs 3.83 billion have been spent as yet.
The budget is expected to focus on peace, reconstruction and inclusive development, among others. This is going to be the first budget of the coming three-year plan period. "We have estimated over Rs 500 billion for the three-year interim plan," said Dr. Jagadish Chandra Pokharel, vice chairman of National Planning Commission (NPC), adding that some Rs 170 billion budget will be allocated for the coming fiscal year.
The two-day meeting of National Development Council (NDC) ended last week by approving the approach paper of the interim plan. The three-year interim plan focuses on reconstruction, rehabilitation and infrastructure development, among others. The NDC met approved the approach paper of the interim plan, which aims to invest Rs 587 billion in the next three years. The government aims to achieve a 5.5 percent growth rate during the plan period and reduce the poverty level to 24 percent. "The NDC meeting has given a message that now the development will move forward based on understanding," said Dr. Pokharel. Interestingly, the Maoists had presented a separate 16-point note stating their differences with the interim plan paper.
