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VOL. 27, NO. 41, June 27 , 2008 (Ashadh 13 2065 B.S.)
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Politically Paralyzed
In the absence of political certainty, the preparation of budget is moving ahead only in bureaucratic manner
By SANJAYA DHAKAL
It's been two months since the elections for the Constituent Assembly (CA) were held and almost one month since the establishment of republic, and yet there is no clear sign when the new government will assume office.
As the jockeying for power has continued since last two months, the parties have yet failed to reach to any understanding to pave the way for new government.
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Economy: Lesser priority |
Every year, the government presents budget estimates for the coming fiscal year in early July. This year, however, the preparation of budget is in a limbo. The officials at the Ministry of Finance are busy preparing the budget based on technical parameters but they are lost amid the lack of clear political command in place.
After they emerged as the largest party in the CA election, the Maoists are widely expected to form the new government. But they have not been able to cobble up enough understanding to form such government leaving the job of preparing the budget in the hands of 'lame-duck' government.
According to Krishna Hari Baskota, chief of the budget division at the Ministry of Finance, they are working on schedule to prepare the budget.
"We have received demands from ministries and departments. We are working as per the parameter fixed by the National Planning Commission – which has asked us to prepare budget remaining within the minimum of Rs 184 billion to maximum of Rs 189 billion limit," said Baskota.
"However, how the budget preparation moves politically is something that only the political leadership will know," he added.
Each and every government wants to have a stamp of its policies reflected in the budget. As such, the Maoists who could soon be forming the government would want their policies reflected in the budget. But due to the delay in reaching political settlement, they could end up having to implement a budget in whose preparation process they are not involved.
The business community feels that cart is being placed ahead of horse as far as the budget preparation is concerned. "The parties that will have to implement the budget should have been involved in its preparation. Otherwise, how can we expect that the huge economic challenges before us can be overcome," said Binod Chaudhary, president of Confederation of Nepalese Industries (CNI).
Added Surendra Bir Malakar, president of Nepalese Chamber of Commerce (NCC), "We are deeply concerned with the prolonging instability and lack of interest towards economic issues. We are still suffering from insecurity."
Unfortunately, the political leaders have not included economy, in general, and budget preparation, in particular, as an agenda during their protracted meeting.
"This shows the true face of the seven party leaders who have shown total indifference toward budget preparation – which ought to have been the primary agenda at this point of time," said former finance minister Dr. Prakash Chandra Lohani.
Before the election, parties had promised to renewed attention towards developing economy once the polls are conducted. But they have again landed in series of political deadlock pushing the economy out from their mind.
INFLATION
Dangerous Movement
The inflation has come forth as the singular challenge to the economic stability as it threatens to reach double-digit figure with recent fuel price hike
By SANJAYA DHAKAL
The storms of inflation have lashed coast to coast across the globe. Riding on record-shattering hike in price of fuel in international market, the inflation has hit all the countries. But its blow has been the most painful for poor and developing countries like Nepal.
The latest rise in the price of fuel by around 21 percent is certain to push the inflation rate further. This, economists say, would break the back of common people.
They have also warned that the uncontrolled rise of inflation would put a brake on economy, which ahs been showing signs of recovery from decade-long conflict.
Soon after the officials predicted around 5 percent rise in the economy this year, the government raised the price of fuel and cooking gas by around 21 percent.
And its direct impact is going to be on the rate of inflation – which has become the number one challenge for economic stability in recent times.
Already the rate of inflation was hovering at 8.9 percent. With the latest hike in fuel prices and continued rise in prices of food products, the inflation could easily race past double-digit figure.
According to Gopal Bhatta, chief of the Price Division at the Nepal Rastra Bank (NRB), the latest fuel price hike could raise the inflation rate by another 3.5 percent in next one year.
Piggy-backing on the rising food and fuel prices around the globe, the inflation is going to hit the common consumers the worst.
Says economist Dr. Shankar Sharma, "Worst affected will be people from middle class and lower class who spend almost 70 percent of their income on food. They will become poorer. The profit level of industries and businesses will come down. The demand for products and services will decline, which will worsen unemployment situation. Even the government will try to decrease its demands."
However, if the government tries to decrease its demands or take measures to encourage lesser use of fuel, it could be counterproductive to economy in the larger context, according to Dr. Tilak Rawal, former governor of NRB.
"If the government does that, the economy will screech to a halt. There is a direct relation between the consumption of diesel and economic growth," said Dr. Rawal.
The government, which did not have any alternative to rising the price of fuel, seems unable to heave a sigh of relief even after raising the price.
In what could spell more trouble to the government, recently Indian government informed that its rate of inflation has accelerated to a 13-year high after record crude oil price compelled it to hike fuel prices.
The Wholesale Price Index of India jumped to 11.05 percent in the first week of June, 2008 compared with 3.11 percent in November of 2007.
The rise in WPI of India, traditionally, has had a direct bearing on Nepal's inflation situation. "In fact, fluctuation in WPI of India creates more inflationary pressures here than the domestic money supply situation," said Dr. Bishwambher Pyakuryal, an economist.
The unbridled rise of inflation rate is proving as a big impediment for the economy, which was showing signs of recovery after years of hovering around two, three percent.
