The sick budget

By DR RAGHAB D PANT

The supplementary budget for the current fiscal year was  announced in the form of an ordinance recently. The main opposition party Nepal Communist Party (UML) has demanded that it be presented in parliament as is the customary practice in a democratic society. This is a legitimate demand, and the Minister of Finance has not yet provided a clear reason for presenting the budget in the form of an ordinance.

Many Nepalese, especially the political-economists, easily predicted the main features of the budget almost to the last letter: an increase in taxes and internal borrowing to finance the rising budget deficit which since the last fiscal year has been covered, sometimes openly, sometimes not quite so openly, by borrowing from Nepal Rastra Bank.

The Finance Minister will definitely blame ‘security’ for the rise in total expenditure but not the bogus accounting procedure that he has followed since last fiscal year in preparing the estimates for revenue, expenditure, marginal tax rate etc that need to be taken care of while preparing the budget. As regards the size, the additional resource requirement will not be less than Rs 15 to 17 billion, assuming repayment of last year’s illegal borrowing of Rs 7.05 billion from Nepal Rastra Bank. In addition, there is expected to be some transfer of resources from the development to the regular budget, which was substantially underestimated in the current fiscal year- regular expenditure was expected to increase by 13.5 percent compared to a growth of 25.8 percent last year. It will, however, be difficult, if not impossible, to raise the government revenue estimated in the original budget estimates. For all these reasons, the budget probably has to be read with a pinch of salt, may be more than a pinch.

How will private entrepreneurs and the economy as a whole cope with the recent fiscal and monetary policy and programmes? It depends on how the policy is framed and used. Unless we match policy instruments with policy goals, the disequilibrium in the economy will be further widened as happened in Argentina recently and in East Asia in 1997. Has Nepal learned from the experience of these countries? My answer will be in the negative.

The recent performance of the economy, as we all are aware, is less than satisfactory with income in per capita terms - the official estimate of increase in gross domestic product has been reduced recently from 6.0 to 2.5 percent- declining, prices deteriorating and the balance of payments position showing an unfavourable position for the first time in seven years. The so-called voluntary disclosure of wealth has created terror among businessmen, industrialists and even among families with a house, a car or a telephone. This has led, according to press reports, to outflow of domestic resources as indicated by the heavy withdrawal of deposits from commercial banks. There is no guarantee, absolutely no guarantee, as of now that tourism related businesses including hotels and restaurants can be revived soon: these, to rephrase the remark of a prominent writer, may die proudly as it is no longer possible to live proudly.

The supplementary budget can, if we have political will supported by professional maturity in policy formulation and implementation, revive the economy by creating confidence in the private sector and let the country move again. Unfortunately, the expected increase in tax- and uncertainty created by Voluntary Wealth Disclosure - will further weaken the economy. The limited domestic private resources will be diverted to the public sector due to the expected increase in the internal borrowings of the government - the crowding out problem in economic terminology - with negative impact on private sector investment.

On the monetary front, Nepal Rastra Bank, with the approval of the Minister of Finance, has reduced the cash reserve ratio which, according to official estimates, will release Rs 1.95 billion in additional funds in the market. At the same time, it has reduced the bank rate- the rate at which Nepal Rastra Bank will lend to the commercial banks. The only purpose of this is to increase economic activity and the national income in the country. Even in normal circumstances, these policy measures will create serious problems in the economy due to mismatch of policy instruments with policy goals. It is obvious now that Nepal is trying to copy the mistake of Argentina and East Asia in using monetary policy for development purposes. Nepal maintains a fixed rate exchange with Indian currency and the Nepali rupee floats parri passu with that currency. This cannot be used to promote growth, especially by printing money, as Nepal Rastra Bank is planning to do. This mismatch of policy instruments will create fundamental disequilibrium in the economy in the not too distant future.

Fortunately, a few of the policy measures were announced just for public relations purposes, and will never be implemented. The reduction in bank rate, for example, has no use: the commercial banks, to the best of my memory have, in the past three decades, never borrowed a penny from the Nepal Rastra Bank. The concept of the bank rate is better to be abolished in Nepal.

Who is benefiting from the current situation: a few commercial banks which have been authorized and have the capacity to hold foreign exchange. These banks are benefiting from the continuous devaluation of Nepalese currency with currencies other than Indian currency. According to Asiaweek, the return on equity of the Himalayan Bank is the 13th highest in whole Asia, followed by Nepal Grindlays Bank and Nabil Bank. That is the reasons why there is more competition to open new banks in Kathmandu. As a result, Nepal Rastra Bank has issued recently letters of intent for the establishment of three more commercial banks.

How can we remain cheerful when the institution responsible for development is sick? Let us wait and see how critically sick the supplementary budget is.

Meeting Mr SAARC

By HITESH KARKI

Hello Mr Karki, I was completely taken aback when out of nowhere a gentleman, somewhere in his seventies, just a guesstimate though, said to me. "Hello Sir", I responded back spontaneously without knowing as to who this gentleman might be. I knew it would be completely rude as well as ungentlemanly like if I were to ask for his identification.

Maybe he sensed this. "Well, don’t you worry, Mr Karki , I know you and you don’t know me. That’s all. You can call me Mr S". Now what, firstly I didn’t know how to respond to such a name. Was he kidding, I thought for a while but then realized no way such a gentleman would be spending his time kidding around with someone like me. Just a second later, while our conversation was taking place in the corner of Durbar Marg, a Cavalcade of siren-blowing mobikes followed by endless number of all brand new Japanese Jeeps and flag fluttering sleek cars, raced across through the road. As I was trying to figure out as to who this guest might be, I happen to look at the face of my new acquaintance who to my surprise was looking at the other direction.

"Ah, the Bhutanese Premier", someone from the crowd said to me. " So Mr S that was the Bhutanese premier", I told him but the he didn’t seem to bother at all but instead, on the other hand , was almost on the verge of bursting into laughter but somehow seemed to control it.

"Was this guy insane or what, what’s there to laugh about?", I could no longer tolerate his weird acts and made up my mind that I better confront this person headway. "S", I didn’t even care to address him as Mr anymore, "What’s the matter. Did you just witness a joke or what?".

"Do you want me to tell you the truth or a lie", it was getting even more frustrating with a question like this. "Obviously the truth", I shot back.

"Well then, answer to your question is, yes I did just witness a joke", suddenly he seemed to get bit contemplative. "I tell you why because when majority of them can do nothing but stand as mute spectators, just like we standing here watching the motorcade pass-by. Am I not justified in saying it’s a joke? I don’t even see seven players "in-there". While it’s always the two playing the game and rest watching, praying, begging. Is there any way you can call it’s the confederation of seven nations?" I could very well see the skepticism and cynicism in him growing more and more.

Just about then, while the road was still sealed-off , another set of motorcade drove by, this time around all the vehicles bore the stickers of one or the other top-television news agencies plastered all over the vehicle, not just on the windscreen. "See how they are selling the drama", I could hear "S" softly whispering from my back. "They ain’t here to cover the summit but ‘film’ the game that would be played by the two . As for the rest I even doubt whether they know anything about the rest of the members let alone what the summit is all about or its agenda."

"See you around, Mr Karki", he said as I was just beginning to fathom what "S" was trying to say. "Ah, your name please", I shouted as I could see him slowly walking into the crowd. "It’s better you identify me as Mr SAARC because I am sure that will always remind you of me from whatever little chat we had today", he shouted back at me waving his hands as he disappeared into the crowd.

Educating Sita

By JUG suraiya

Has Indian education become un-Indian? If so, how should we go about re-Indianising it? What is Indian, what is education? Should Saraswati — gracious goddess of learning — be ritually invoked in our groves of academe, which increasingly resemble a desert wasteland converted into a municipal rubbish dump? Or should self-appointed chowkidars turn her away from the gate for fear she might be an agent provocateur of a sinister political agenda which seeks to saffronise the squeaky clean slate of secularism?

As these and related questions buzzed in the air like agitated hornets, this column sought a question-and-answer interview with the ministry of education. But in the conviction that — like charity — re-education begins at home, the ministry of education had packed itself off lock, stock and blackboard to get itself re-educated. However, it had left behind a spokesperson to provide such answers as were deemed necessary.

Laying down the ground rules for the interview, the spokesperson clarified that it would not be a question-and-answer, or Q-and-A session, but an A-and-A, or answer-and-agreement exercise. The whole trouble with education, explained the spokesperson, was that it was too full of questions. This was a fundamental flaw. For questions by definition were negative, in that they implied a lack of certitude. Answers on the other hand were 101 per cent positive, chock-a-block with all the certitudes under the sun, moon and stars. Setting the ball rolling, the spokesperson provided the first suo motu answer of the session.

A: First and foremost, it is an utter and absolute canard to call me or anyone else in the ministry a spokesperson. We don’t put spokes in any person, let alone in wheels. We leave such nefarious anti-national activities to the anti-national opposition.

A: Ah, yes indeed.

A: And it’s even more of a canard to say we are trying to saffronise education. Saffron’s almost as costly as onions, for crissake! Think we’re going to waste all that expensive saffron on stupid old education? Certainly not! The most education can hope for from us is a mustardisation. Using only government-approved adulterants, of course.

A: Of course.

A: It’s all the fault of that blasted Macaulay fellow, as everyone well knows. Thanks to him we’ve had to put up with a whole generation of Angrezi-imitating ‘Macaulay’s children’, full of un-Indian values. We should have banned that first Home Alone movie when it came out years ago. That would have put paid to Mr Macaulay bloody Culkin!

A: Macaulay Culkin. Put paid to. Absolutely.

A: Anyhow, now we must immediately introduce Sanskrit primers and Vedic texts in each and every classroom, in each and every school, in each and every state in the nation. It is vital for economic revival — the economic revival of my cousin brother-in-law who is operating an unauthorised printing press in Daryaganj. Business is bad, and the poor chap needs the tender. And if a successor government comes in and scraps the order for all these new textbooks, no big deal. He can always go back to printing pirate editions of Sidney Sheldon from which he’s made a bomb, printing mistakes and all.

A: How reassuring.

A: You ain’t heard nothing yet. We’ve just signed on Madonnaji to do a forthcoming Indipop superhit album called Saraswati Bandana. We also asked Shri Michael Jackson to do a sequel to Bad. But Michaelji unfortunately had to decline because he said he doesn’t know how to spell ‘pseudo-secularists’.

A: Typical of the sneaky devils. Always creating problems.

A: Aha, we’ve got the so-and-sos on the run with our plan to enlarge education so as to encompass the hitherto sadly neglected realm of spiritual matters. Yes, we’ve decided to disinvest that stodgy mid-day meal scheme and hand it over to the private sector, who’ll give the little wretches something with a bit more spirit in it. That’s right. We’re trying to get the entire scheme underwritten by United Breweries.

A: Cheers.

A: It’ll also solve the problem of teachers always whinging and whining about how poorly they’re paid, now they’ll be able to moonlight as bartenders. Think of the money they’ll make on tips alone! Beats the private tuition racket any day. Of course, all this is going to take a while to happen. And till it happens it is the duty of all conscientious parents to ensure that their children go to proper, decent, patriotic, value-oriented educational institutions, like the ones that all the politicians’ baba log go to — and which unfortunately are all abroad. Now if you’ll excuse me, I’ve got to drop my own kid to school; the school Airbus to the US is about to leave.

A: Here’s your boarding pass. Happy landings.