Monday, June 25, 2012

Sustainable, inclusive growth key

Sustainable and inclusive growth is more important than the double digit growth, according to the experts.
"Economic growth alone does not guarantee people's welfare," said senior economist Prof Dr Bishwhembher Pyakuryal, at an interaction organised by Institute for Integrated Development Studies (IIDS) here today.
On one hand the government has been talking of double digit growth and on the other, the country lacks resources, he said, adding that rate and return of public sector spending has been unsatisfactory leading to the uneven growth.
The country needs to invest heavily on infrastructure, education, healthcare and other basic amnesties for economic growth, said executive director of the IIDS — one of the leading private sector and non-partisan think tanks — Dr Bishnu Dev Pant.
"Unfortunately the country relies heavily on foreign aid and loans to meet such public expenditures, which is not sustainable, he said, adding that the government must raise sufficient revenues for public expenditures via efficient and fairer tax policies.
Political instability has slowed down the pace of economic growth, Pant said, adding that capital expenditure is largely dependent on foreign aid making the government unable to spend on the development expenditures.
Lack of better public expenditure management and result-oriented budget has made the budgetary system redundant, said former economic advisor of the Finance Ministry Keshav Acharya.
Donor-driven propriety, rising non-budgetary expenses and arrears, weakness in various funds and government assets management and public procurement are some of the hurdles in the national development process, he said, adding that the current budgetary system needs reform.
The government's capacity to spend on development works has been eroding, Acharya added.
Declining capital expenditure has greatly affected the key infrastructures coupled with affordable and reliable electricity supply and poor transport network that have contracted the economic growth prospects.
However, the government's ability to spend more on development works will push the economic growth over five per cent from current over three per cent growth, according to a research 'Nepal Economic Outlook, 2011-12 conducted by IIDS.
If the government can increase capital expenditure from current eight per cent to 15 per cent and decrease recurrent expenditure from 18 per cent of current trend to 10 per cent — concentrating on development works and investment — the economic growth rate could climb up to 5.1 per cent in the next year 2012 and 4.6 per cent in an average in the next three years, the research revealed.
However, the current trend coupled with policy measures as well as external factors remain unchanged, Nepal Economic Outlook Model projected the economic growth to remain between 4.6 per cent in 2012 and 4.3 per cent in an average the next three years.
The report also suggested boosting the confidence of domestic investors not only to build the domestic goods competitive but also to attract foreign direct investment that would create employment in the country that has been witnessing an exodus of both brain and muscle drain hurting the country's growth prospects further.

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