Wednesday, May 29, 2019

Government presents 1.53 trillion deficit budget

Finance Minister Dr Yuvaraj Khatiwada today presented Rs 1.53 trillion deficit budget – targeting to achieve 8.5 per cent economic growth, and containing inflation under six per cent – for the next fiscal year 2019-20 in the Federal Parliament.
Presenting the federal budget in the joint session of the House, Dr Khatiwada said that the government has increased the total budget size to Rs 1.53 trillion – some 17 per cent bigger – for next fiscal year from Rs 1.31 trillion in the current fiscal year. "The capital budget has also increased from Rs 313.99 billion to Rs 408.59 billion."
The government has earmarked Rs 408.59 billion (26.6 per cent) for capital expenditure and Rs 167.85 billion (11 per cent) for financing provision, he said, adding that the government will mobilise Rs 981.13 billion from revenue, Rs 57.99 billion from foreign grants, Rs 298.83 billion from foreign loan and Rs 195 billion from domestic borrowing.
Though, finance minister – presenting his second budget in the row – claimed that the government has planned to achieve 8.5 per cent economic growth on the base of infrastructure development, the capital budget – aimed at expediting the development activities – seems completely dependent on the foreign aid and grants, as he has allocated Rs 957.1 billion under recurrent expenditure and projected to mobilise Rs 981.13 billion in revenue. The projection of revenue could meet only the recurrent expenditure, if he is able to meet the target, but going by the current fiscal year’s trend, the government has failed to meet both the revenue mobilisation – because of disappointing mobilisation of VAT, customs, excise and income tax (both corporate and personal) and also spending target.
The government has, however, revised the tax structure claiming to make it more sustainable source generated through internal economic activities rather than existing import-based revenues.
But the minimum income tax threshold for individuals has been raised to Rs 400,000 per annum and Rs 450,000 for married couples – though they will have to pay 1 per cent social security tax – from Rs 350,000 for single and Rs 400,000 for married couples. It is expected to give some relief for the working class people.
With an ambitious economic growth target but few tangible bases, the budget has also focused on increasing cash-based social security allowances – as promised in the election manifesto – salary hike for the government employees – the regular process every 2 -year – and hefty amount for the parliamentarians – the most opposed dole out that is the wastage of public money – even after the election of local governments.
Bowing to the political pressure, finance minister allocated fund for Parliamentarians. But in the past parliamentarians were allocated budget as there was no local government for two decades but the budget allocation for them now will encourage gross financial indiscipline. The fund – named Local Infrastructure Development Partnership Programme – has been increased by 50 per cent – from Rs 40 million to Rs 60 million, he said, adding that the salaries of non-gazetted officers have also been hiked by 20 per cent and those of gazetted officers by 18 per cent. “The budget has earmarked Rs 64.50 billion for the social security scheme, under which the monthly allowance for the elderly has been increased by Rs 1,000 to Rs 3,000.”
The scheme is expected to benefit around 1.3 million people above the age of 70, he added. “Likewise, allowances for widows and single women have been increased to Rs 2,000 from Rs 1,000.”
The budget has also allocated Rs 220 million to provide air transport facilities for pregnant women and has further promised to provide access to clean drinking water to 92 percent of the population by the next fiscal year.
“Overall development is only possible through high economic growth and its equitable distribution,” Dr Khatiwada said, adding, “Our socialist goal is to fulfill the basic needs, such as employment, food security, basic health and education services, and clean drinking water, for all citizens.”
He said that the budget has also focused on social justice, increment in exports to reduce the trade deficit, and increase in general productivity, apart from completing incomplete projects. Khatiwada has also allocated budget for education, health, science and technology, agriculture, drinking water and hygiene, social security, employment tourism, industry, commerce and supplies, energy, transportation, urban development, presenting the rosy picture of the economy, which seems not in track.
“The budget expects hydroelectricity capacity to be double and manufacturing activities may improve on the back of a stable and adequate supply of electricity,” he said. “The budget has promised that 1,000 MW of electricity will be added to the national grid in the next fiscal year, along with a new, ambitious project to generate 3,500 MW of electricity from a combined 18 projects by raising funds from the public under the slogan ‘Nepal ko pani, Janta ko lagani’.” But the programme ‘Nepal ko pani, Janta ko lagani’ has been blamed to be a step to governtisation of private hydro power projects, according to the independent power producers.
The budget has also continued the Prime Minister’s Employment Programme with an allocation of Rs 5 billion. The budget also revitalised the old programme ‘Afno Gaun, Afai Banau’ – let’s build our villages ourselves – that was first introduced some 25 years ago in 1994 by the late leader Bharat Mohan Adhikari.
The budget has allocated the largest chunk to the education sector, which gets Rs 163.76 billion, followed by roads, infrastructure and railway transportation at Rs 163.52 billion as the budget for Upper Tamakoshi, Budhi Gandaki and Budi Ganga hydroelectric projects;  Rani-Jamara-Kulariya and Bheri Babai irrigation projects; Nijgadh, Bhairahawa and Pokhara international airports; Kathmandu-Tarai expressway; Postal and Mid-Hill highways; and the East-West Electric Railway Line have been allocated for their completion.
Dr Khatiwada has also allocated Rs 141 billion for post-earthquake reconstruction, Rs 83.49 billion for the energy sector, Rs 68.78 billion for health, Rs 40.73 billion for urban infrastructure and housing, Rs 34.80 billion for the agricultural sector, and Rs23.63 billion for irrigation.
The budget has allocated Rs 8 billion for the Prime Minister’s Agriculture Modernisation Project – started by the earlier Prime Minister Puspa Kamal Dahal ‘Prachanda’ – and increased state subsidies on chemical fertilisers by 50 per cent to Rs 9 billion. Similarly, he has allocated Rs 950 million for subsidies to encourage sugarcane farmers. The government has also announced the enforcement of anti-dumping tariffs for imports on agriculture products.
The budget has announced raising Re 1 from every litre of petrol and diesel as infrastructure tax to finance road projects. Currently, the government has been levying infrastructure tax of Rs 5 from each litre of fuel to fund to the construction of Budhigandaki Hydropower project. Around Rs 30 billion has been raised for the hydel project but remained largely unutilised, and the government has been in dilemma on who is going to construct the much-controversial Budhigandagi Hydropower project.

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