Maoist interests couched in populist budget

Armed with people-friendly slogans, Finance Minister Dr Baburam Bhattarai today presented an ambitious, inflated and deficit budget of Rs 236.15 billion.
The budgetary allocations are scattered. The minister tried to woo the rural lot, true to the Maoist ideology. However, the first budget of the Federal Democratic Republic of Nepal did not mention a word about federalism.
The budget for the fiscal year 2008-09 aims to allocate funds on a piecemeal basis, focussing on key social sectors like education, health, Dalits, women, Madhesis and marginalised communities. But, the focus seems diffused.
The budget has outlined underdevelopment and absolute poverty, stagnation of agriculture sector, rampant unemployment and semi-unemployment, inequality and discrimination, inadequacy of physical infrastructure, deteriorating quality of public education and educational discrimination, corruption and poor quality of work culture, to bring the peace process to a logical conclusion as some of the major challenges.
According to the annual estimate of income and expenditure, recurrent expenditure is estimated at Rs 128.51 billion, capital expenditure Rs 91.31 billion and principal payment Rs 16.18 billion.
Estimated expenditure is higher by 39.7 per cent against the total allocation of last fiscal and by 44.5 per cent than revised expenditure.
The budget has planned to raise Rs 129.21 billion from the current sources of revenue. Foreign assistance stands at Rs. 65.79 billion (including Rs 47.93 grant and 18.70 billion loan).
Deficit is pegged at Rs 41.11 billion, which has marginally doubled than last year’s projection.
According to former finance minister Dr Ram Sharan Mahat, it is a pork barrel budget. “It’s been blown up like a balloon and has crossed the limit of financial indiscipline. It’s not at all growth-oriented. All revenue projections are grossly exaggerated and impractical. It will lead to high deficit and inflation,” said Dr Bhattarai’s predecessor.
Dr Jagadish Chandra Pokharel, former vice-chairman of the National Planning Commission, however, hailed it as “bold”.
“There are innate problems and it will face challenges in both raising revenue as well as expenditure on development. Last year, the government could spend only around Rs 42 billion on development. It will be easier to spend on relief and welfare, but capital expenditures that require the fulfilment of due procedures will be difficult,” Dr Pokharel explained.
“Reading between the lines, one can understand Dr Bhattarai’s intention of providing jobs for his cadres in rural areas in the name of illiteracy eradication programmes,” said Constituent Assembly member Nabindra Raj Joshi. “The budget is populist, scattered and election-oriented,” he opined.
A reasonable sum has been earmarked for the agriculture sector, road network development and hike in salary of the civil servants, who are now entitled to a monthly raise of Rs 2,000. The increased pay packet comes into effect from this month.
Dr Bhattarai has tried to keep his promise to small farmers by waiving their debts of upto Rs 30,000. There has been exemption on interest and penalties on the loan amount — from Rs 30,000 to Rs 1,00,000. The government pledges to pay banks Rs 9.18 billion over a period of 10 years. He, however, seems to have forgotten the consequences of loan waivers.
Dr Bhattarai also seems to have pulled a fast one by protecting Hetauda Textile Industry and Gorakhkali Rubber Industry. He has guaranteed government mechanisms in the guise of ready markets.
The chief ideologue of the Maoists has even smartly assimilated his party’s manifesto with the populist free market economy.
Entrepreneurs were confused at the largesse. Kush Kumar Joshi, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said, “The real test of the budget will be its implementation.” FNCCI was expecting the budget would spell out multiple Value Added Tax rates that it had been lobbying for long.
The budget has projected 7 per cent GDP growth and claimed to maintain inflation at 7.5 per cent, which is unrealistic, at best, since it is an imported phenomenon linked to global markets.
Currently, inflation is pegged at 12 per cent. It will be extremely difficult to bring it down any further. There is also doubt about the macroeconomic implications of such a large budget.
However, Dr Pokharel feels that the budget should be understood by linking it to the government’s policies and programmes. “Although most of the programmes appear to be a continuity of the previous regimes, we should try to understand why the new government is talking about a break with continuity,” the former NPC vice-chairman said.
The budget has rearranged statistical evidence to make a different historical assessment and draw a different conclusion.
“We are only seeing the preliminary building blocks of the Maoist policies. They are likely to lead the country towards greater role of the state and even greater involvement of the parties in the development process,” said the former vice chairman Dr Pokharel.
“They don’t trust the bureaucracy and believe that the political machinery must be engaged. This is what they mean by a break from the tradition,” he explained.