National 5 (Spotlight Weekly)

BUDGET ORDINANCE
Focus On Continuity

With minor changes, the government issues a new ordinance to give continuity to the budget of the current fiscal year

By SANJAYA DHAKAL

In the absence of the parliament, the government had to re-issue the budget ordinance to give continuity to the Rs 102.4 billion-strong budget it had announced six months ago.

Finance Minister Dr. Prakash Chandra Lohani, talking to media, said that there are no major policy changes in the new ordinance. “Our aim is only to give continuity to the earlier policies. We are satisfied with the present policy but would need to work harder to achieve the objectives,” he said.

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King Gyanendra issued new Finance Ordinance 2060 on January 15. Although the new ordinance does not have any major policy departures, it has slashed the import duty on sets of mobile phones from 15 to 5 percent. The decision was provoked by similar slashing of import duty on mobile phones in India, experts said.

The move was also a response to the growing smuggling of the mobile sets. The government believes that this new move will make mobile phones accessible to more Nepalese.

Another new addition in the budget is the decision to revoke the imposition of special duty on the import of medicines. The government had imposed 0.5 percent duty on medicines two years ago. Similarly, the import duty on syringes (medical equipment) has been reduced to 5 percent from earlier 15 percent.

In order to woo the big taxpayers and thereby increase its revenue, the government has announced the establishment of the Big Taxpayers’ office (BTO). The renewed ordinance also has lifted custom duties on exports of goods worth up to Rs 5000.

The ordinance also introduces imposing foreign employment service charge from all those who go for overseas employment whether through organized manpower agencies or on individual basis. Earlier only those going through registered manpower agencies were made to pay such charge.

The finance ordinance comes at a time when the government has been claiming that the economic situation has improved. Dr. Prakash Chandra Lohani said that macro-economic indicators of the country are sound at present. “In terms of government’s financial condition, the situation is not so bad. Despite the adverse security situation, the progress in the government’s financial health is an encouraging sign,” said Bhanu Acharya, secretary at the Finance Ministry.

According to the Finance Ministry, compared to the situation two years ago, the government’s financial health has improved a lot.

“Two years ago, the government had collected revenue of Rs 17.98 billion. This year, in the first five months of the current fiscal year, the government has collected revenue of Rs 22.03 billion. This figure is 14 percent more compared to the last year. This figure is based on the data up to the second week of the month of Poush (first week of January),” said Acharya.

Likewise, the government claims that the regular expenditure has increased by only 6 percent this year while the development expenditure has increased by 18 percent compared to last year. The level of domestic borrowing, too, is satisfactory this year as the government has only collected Rs 1.35 billion till now.

“Moreover, there is Rs 4.39 billion surplus in the government treasury at present, which is a very good thing given our track record of mostly running the treasury in deficit. The treasury position is very good because of lesser domestic borrowing as well as Poverty Reduction Strategy Credit (PRSC) from the World Bank. As such, we are in a position to guarantee resource allocation to priority development projects,” said Acharya.

The government is confident that it would be able to achieve growth rate in excess of 4 percent this year. “Not only the agriculture sector has grown impressively, but there has been favorable progress in manufacturing, remittance as well as tourism,” said Dr. Shankar Prasad Sharma, vice chairman of the National Planning Commission (NPC).

Not only the government but even the Asian Development Bank (ADB) has acknowledged the progress. “It seems that the macro economic situation has improved. It also appears that with the strong rebound in agricultural growth, both the overall GDP growth rate forecast by the government will be realized, which is over 4 percent, and that the inflation may come down because of the large increase in agricultural production. The agricultural sector will grow by 3 – 3.5 percent while the non-agricultural sector will grow by around 5 percent,” Sultan Hafeez Rahman, country director of the ADB’s Nepal Resident Mission, had said a few weeks ago.