Balancing Act

Despite some positive developments in the last four months, no body disagrees that the new finance minister has a knotty problem at hand

By A CORRESSPONDENT

The last four months have been positive for Nepalese economy since the announcement of cease-fire between the government and Maoists in January 30.

With the dismal economic growth of less than one percent in the fiscal year 2001/2002, experts now hope that it will touch 1.5 percent this year.

In spite of positive vibes, the uncertainties are also looming large threatening to undo any progress that has been made in this period. The agitation of the five political parties is still continuing and the Maoists are yet to surrender their guns. The peace, therefore, is extremely delicately poised.

Dr. Lohani : Up hill task

"As long as the country does not have political stability, there is a very little hope for economic development. Along with the reforms in the economic sectors, the budget needs to encourage the private sector," said Binod Kumar Chaudhary, president of Confederation of Nepalese Industries (CNI). "The forthcoming budget should inject confidence in the private sector."

During a recent interaction to discuss the forthcoming budget, minister, policy makers, industrialists and experts stressed the need to promote the private sector and continue with the economic reforms programs. The interaction was organized by the Society for Economic Journalists, Nepal.

"Pulling out from the economic reforms is not an option at all. Forthcoming budget will support the reforms encouraging private sector participation in economic development activities," said Finance Minister Dr. Prakash Chandra Lohani, who is credited with introducing the economic reforms and liberalization in the country. "At a time when the government needs to concentrate on the priority sectors like rehabilitation and reconstruction of damaged infrastructures, private sectors have to take lead in most of the areas."

While the revenue collections have increased and the exports of Nepalese products have slightly gone up, the economy is apparently heading towards positive direction. Experts, however, point to the fragile nature of Nepalese economy.

" I have not seen any reliable phenomenon to suggest that the economy is heading towards right track. Even a small incident can rock Nepalese economy," said Dr. Madan Dahal, chairman of Central Department of Economics, Tribhuwan University. "While the revenue base is shrinking, there is a need for huge investment to smoothly operate the poverty alleviation program.  There is very limited option in front of the finance minister."

Economists like Dr. Bishwombher Pyakuryal believe that it is equally important to instill confidence among public about the efficacy of the government machinery. "It is important that the new minister concentrates on policy reforms, long-term fiscal reforms and compliance of past commitments," said Dr. Pyakuryal.

As the poverty alleviation is the major objective of the current Tenth plan, the challenge is to streamline programs targeting rural poor. Although the donor countries have expressed that they will support poverty alleviation programs, their problem is compounded with the absence of elected local bodies that has to carry out the development programs in the rural areas.

"Since the finance minister Dr. Lohani has already expressed his commitment to the liberalization and poverty alleviation, the new budget will follow the projection and target set by the tenth plan," said Dr. Shanker Sharma, vice chairman of National Planning Commission.

Along with the problems of financial sectors, the non-financial sectors are also affecting the national economy. "In the financial sector, the reform process has yielded some results," said Dr. Tilak Rawal, governor of Nepal Rastra Bank.

Business and industrial sectors are also expecting some relief from the new budget. "The industrial sector needs some kind of relief in the forthcoming budget. The last seven years of Maoist insurgency has badly hit the industries of all kind," said Binod Bahadur Shrestha, acting president of Federation of Nepalese Chamber of Commerce and Industry. 

Business groups have their own concern. "We require tax reduction on certain items. Since the revenue collecting departments are yet to improve their performance, the existing system should be revamped keeping in mind the changing scenario," said Rajesh Kaji Shrestha, president of Nepal Chamber of Commerce.

Coupled with the domestic problems, there is also another development that could influence the shaping up of the forthcoming budget. Nepal is set to acquire the membership of the World Trade Organization (WTO) later this year.