New government promises economic austerity, effective service delivery

The newly formed government led by Prime Minister Puspa Kamal Dahal 'Prachanda' has promised economic austerity and effective service delivery.

The first cabinet meeting of Prime Minister Dahal decided not to take the increased salary for the current fiscal year. The budget for the current fiscal year 2022-23 has increased the salary of the government officials, including the ministers. Due to economic crisis, the erstwhile government failed to mobilise the revenue not only falling short of the target but also failing to meet the recurrent expenditure.

Dahal, in the cabinet, also instructed to prioritise good governance, better service delivery and end the hassles faced by people while obtaining passports and licenses. The eight-member cabinet also decided to make arrangements to ensure that citizens can obtain essential documents like passports and driving licences without waiting long in queue. Passport and driving licence-obtaining processes in Nepal are complicated and mismanaged, which has forced service seekers to stand in queue for hours from early morning. Likewise, there is a lot of complaints of bribery and forgery.

The new government has decided to make efforts to reform the service delivery of government offices to make the public feel change.

Talking to journalists after the first cabinet meeting today evening, Dahal said the cabinet has been formed as per the people's mandate. "Challenges galore ahead," he said, adding that the first meeting of his cabinet decided to take stock of the economic crisis and identify solutions.

Earlier in the afternoon, Dahal also instructed not to buy extravagant goods at Baluwatar, the official residence of the Prime Minister, where he will be shifting day after.

According to Prime Minister Dahal's personal secretary Ramesh Malla, the Prime Minister has instructed not to buy any luxury goods for his use. Dahal courted controversy, during his first tenure as Prime Minister, as he was blamed for buying a bed worth Rs 1 million for him.

Dahal was sworn-in as the 44th Prime Minister of Nepal at the President Office at Sheetal Niwas today and formed an eight-member cabinet immediately.

Government fails to earn and spend

As usual, the government has not been able to spend the capital budget, despite being the historically strong and two-third majority. The government has neither been able to mobilise the revenue unlike during the uncertain fiscal years, which sometimes saw two governments in one fiscal year.
Despite the government’s repeated commitment to expedite capital expenditure, the government has been able to spend only 4.41 per cent of the capital expenditure in the first quarter of the current fiscal year 2019-20, according to the Financial Comptroller General Office (FCGO). “The government has been able to spend only Rs 18.37 billion in capital budget, out of the total Rs 408 billion capital expenditure for the current fiscal year,” the FCGO data reveals, adding that the allocation for the capital expenditure accounts for 26.6 per cent of the total budget of Rs 1,532.97 billion for the current fiscal year 2019-20. “The government has been able to spend 16.38 per cent of recurrent budget in the first quarter.”
The government spent Rs 156.73 billion – out of the Rs 957.1 billion recurrent expenditure for the current fiscal year – in the first quarter. “The aggregate spending of the budget including recurrent, capital and financing stands at 11.61 per cent,” according to the data.
The incumbent government has been vowing to boost the capital spending in the current fiscal year by introducing various measures, though the underspending of the capital budget has been a perennial problem. The government also failed to spend capital budget compared to the same period of the last fiscal year 2018-19 too. According to the FCGO, the government had spent 7.2 per cent to Rs 22.6 billion of the capital budget that stood at Rs 313.99 billion in the last fiscal year. “The government had been able to spend only 75 per cent of the total capital budget in the last fiscal year.”
The focused mainly on drafting and revising laws as required after the constitution promulgation, apart from setting up institutions in the federal set up, confusion over jurisdiction of projects, and delay in staff adjustment have been attributed to the poor capital expenditure.
But the finance minister Dr Yuba Raj Khatiwada said that the capital expenditure tends to remain weak in the first quarter as spending units draw contract and bidding plans during this period. “But the government will boost the expenditure,” he said, pleadging to meet the capital spending target.
The large chunk of the expenditures will be made in the second half of the fiscal year, raising the question about the quality of the spending.
Likewise, the government has also failed to mobilise revenue. “The government has been able to mobilise 16.43 per cent to Rs 182 billion revenue in the first quarter of the current fiscal year,” the FCGO data revealed, adding that the government has targeted to mobilise Rs 1.1 trillion revenue for the current fiscal year.
The government has suffered a revenue shortfall of Rs 70 billion – some 28 per cent below the target for the first quarter of the current fiscal year due to slump in imports and the government’s failure to raise adequate revenue through domestic economic activities.
According to the Financial Comptroller General Office (FCGO), the government has mobilised Rs 182.7 billion in the first quarter of the ecurrent fiscal year. The Finance Ministry had targeted to mobilise Rs 252 billion in the first quarter.
Department of Customs and the Inland Revenue Department – both failed significantly in revenue mobilisation. The customs office was given a target of Rs 132 billion but the government has been able to mobilise only Rs 93 billion, whereas the Inland Revenue Department has been able to mobilse only Rs 80.60 billion, against its target of Rs 92.70 billion.
The government has set an ambitious annual revenue growth target of 35 per cent for the current fiscal year.
The fall in imports that declined by 1.2 per cent caused by a slump in the import of fuel, gold, silver, cement clinkers, aircraft parts and polythene granules hit the revenue mobilisation, according to the Department of Customs. The FCGO data also revealed that the government faced revenue shortfall of 114.34 billion in the last fiscal year too.

Government yet to spend almost 50 per cent of development budget

The all powerful government in the history of Nepal has failed to expedite the development activities as half of the development budget is yet unspent even as the current fiscal year draws closer.
The incompetent and highly politicised bureaucracy and ‘communist’ government – despite the two-third majority – has been able to spend only 56.35 per cent to Rs 179.7 billion – out of the Rs 313.99 billion allocated for fiscal year 2018-19 – by today July 9, according to the Financial Comptroller General Office (FCGO).
The Finance Ministry has revised the capital expenditures downwards to Rs 265.20 billion through the mid-term budgetary review for the current fiscal year 2018-19. Due to government’s failure to enhance its spending capacity, it is still to spend over Rs 85 billion within next one week to meet even the downward revised development expenditure target. “
Last fiscal year 2017-18, capital expenditure stood at 79.74 per cent, which was the highest since 2012-13 when the spending has touched 82.56 per cent.
The FCGO data also reveals that the government has spent a total of – including capital expenditure, financing and recurrent – 72.15 per cent of the budget of Rs 1.31 trillion. The government has spent Rs 677.07 billion recurrent expenditure – out of the total allocated Rs 845.45 billion – whereas it has spent Rs 92.13 billion on financing – out of the total Rs 155.72 billion – till today.
Lack of proper project planning, weak policy execution capacity of the bureaucracy and weak project execution capacity of contractors have been, though, blamed for the lack of spending capacity of the comparatively stronger government, the government is still hopeful that the budget spending could reach upto 80 per cent in a week due to last minute payments. As a result, the last hour ‘irresponsible’ spending trend will also continue this year making the government hopeful of spending around 80 per cent by July 16, the last date of the current fiscal year.
Along with the abnormally low capital budget spending, the low revenue mobilisation exposes the government inefficiency. As of today, the government has been able to mobilise only Rs 672 billion against its target of Rs 831 billion, though it claimed to meet the target in a week.

Half of capital budget yet to be spent, and in 10 days?

The historically strong and stable government led by Prime Minister KP Sharma Oli has miserably failed to expedite the development budget as it is yet to spend more than half of the development budget – allocated for the current fiscal year – but there is less than half-a-month to end the fiscal year.
The government has spent only 48.89 per cent or Rs 154.38 billion, out of the total Rs 313.99 billion development budget for the fiscal year 2018-19, till today – June 20 – according to Financial Comptroller General Office (FCGO).
Though, the Finance Ministry had revised the capital budget for this fiscal year downwards to Rs 265.20 billion – some 15.5 per cent down from the previous allocated capital budget of Rs 313.99 billion – through the mid-term budgetary review due to its failure to boost capital formation programmes and tepid progress of development projects, the development budget spending stands at 71 per cent, of the revised allocation also. However, it could not be called legal as the figure is not approved by the Parliament. The development budget figure of Rs 313.99 billion is approved by the Parliament, and is legal, whereas the revised data is only for the reference of the Finance Ministry.
According to the FCGO, the government has been able to spend – including capital expenditure, financing and recurrent – some 64.12 per cent of the total budget of Rs 1.31 trillion for the current fiscal year 2018-19.
The government has spent Rs 619.29 billion as recurrent expenditure – of the total Rs 845.45 billion – till today, the FCGO data revealed. The recurrent expenditure is primarily the spending of the government on non-capital formation programmes like salaries of government staffers, social security and other expenses, though some of the development projects also get budget through recurrent budget.
Likewise, the government has spent some 44.74 per cent to Rs 69.66 billion – out of the total allocated budget of Rs 155.72 billion – on financing till today, according to the FCGO data. Financing is primarily the interest served for the domestic and foreign borrowings.

Provincial budgets follow wrong precedent of federal budget, distribute budget to parliamentarians

Following the wrong precedents of the federal government, the provincial governments distributed the budget to parliamentarians, in one name or the other, which is a gross misuse of the public tax money. 
Unveiling their third budget – though practically second one as provincial election was not completed then – nearly three weeks after the Federal Budget 2019-20, the seven provinces, however, claimed that they have focused on infrastructure including including cable car, monorail and tunnel roads, and social development.
The provincial governments tabled a total budget of Rs 2. 596 trillion. The provincial budget has increased by 25.55 per cent compared to last fiscal year’s budget. Province 3 has tabled the highest budget of Rs 47.50 billion, whereas Far West Province has tabled the lowest at Rs 28.16 billion.

Province 1
Province 1 Minister for Economic Affairs and Planning Indra Angbo tabled a budget of Rs 42.20 billion. “Of the budget, Rs 18.54 billion is allocated for recurrent expenditure and Rs 23.57 billion for capital expenditure,” he said, adding that education sector will receive Rs 1.28 billion, drinking water and sanitation Rs 3 billion, and irrigation will get Rs 3.2 billion.

Province 2
Province 2 government presented a budget of Rs 38.72 billion. “Out of the total budget, Rs 19.11 billion was allocated for recurrent expenditure, whereas Rs 19.26 billion is for capital expenditure,” the Province 2 government said adding that the government has announced Rs 30 million for each constituency in accordance with the Constituency Infrastructure Development Special Programme. “The budget has also focused on agriculture, education and health.”

Province 3
Province 3 Minister for Economic Affairs and Planning Kailash Prasad Dhungel announced a budget of Rs 47.6 billion for the next fiscal year. “The budget has allocated Rs 24.46 billion for recurrent expenditure and Rs 22.03 billion for capital expenditure,” he said, adding that the budget will focus on developing infrastructure including ring roads and tunnels across several parts of the Province, tourism development, agro-sector modernisation, and community farming.

Gandaki Province
Gandaki Province Minister for Economic Affairs Kiran Gurung tabled a budget of Rs 32 billion. “Of the total budget Rs 12.28 billion as been allocated for recurrent expenditure and Rs 19.85 billion for capital expenditure,” he said, adding that the government has focused on programmes and policies announced from the last fiscal. “Additionally, it has allocated ample funds for the construction of ‘national pride projects’ within the province.”

Province 5
Province 5 Chief Minister and Economic Affairs and Planning Minister Shankhar Pokharel announced the budget of Rs 36.41 billion for the next fiscal year. “Rs 13.45 billion has been allocated for recurrent expenses and Rs 18.57 billion for capital expenditure,” he said, adding that the budget has given top priority to infrastructure and tourism development, agriculture sector commercialisation and mobilising the sector to eliminate unemployment, and completion of Gautam Buddha International Airport.

Karnali Province
Karnali Province Minister for Economic Affairs Prakash Jwala unveiled a budget of Rs 34.35 billion. “The budget has allocated Rs 13.05 billion for recurrent expenses and Rs 21.29 billion for capital expenditure,” he said, adding that the Karnali Province government has prioritized agriculture, infrastructure and tourism sectors, setting up the Karnali Infrastructure Development Authority as part of the budget allocation of Rs 1.2 billion for the infrastructure sector.

Sudurpaschim Province
Sudurpaschim Province Minister for Economic Affairs Jhapat Bahadur Bohara tabled a budget of Rs 28.16 billion today. “The budget has allocated Rs 12.57 billion as recurrent expenditure and Rs 13.06 billion as capital expenditure,” he said, adding that the government has prioritised agriculture, drinking water, energy, irrigation, infrastructure and roads. “The budget has also focused on promotion of a model agriculture village with Rs 5 million budget for every local unit.”

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.

Government to spend Rs 9.96 trillion in next five years

The National Planning Commission (NPC) has projected a total of Rs 9.96 trillion of public spending in the next five years.
The fifteenth five-year plan – recently endorsed by the National Development Council (NDC) meeting – has forecast the capital and recurrent expenditures to remain almost equal in the five year period, departing from the current trend of expenditure where the recurrent budget is more than double the spending toward capital budget, though it can do nothing to improve the government spending capacity. "Out of the total government budget size of Rs 9.96 trillion over the five-year period, Rs 4.596 trillion will be spent as recurrent, while Rs 4.02 trillion will be spent as capital expenditure."
Of the total budget of Rs 1.396 trillion for the current fiscal year, the government has allocated Rs 789 billion for recurrent expenditure while Rs 471 billion for capital expenditure.
The five-year plan – starting from fiscal year 2019-20 to fiscal year 2023-24 – has increased the capital expenditure assuming that the capital spending will increase in next five years as the government prioritises various development projects. The country also plans to graduate to the status of developing country from current least developed country in next five years, according to the five-year plan.
In the next five years, the government will have to spend Rs 1.35 trillion in the fiscal arrangement including investment in public enterprises and debt servicing.
Likewise, the government will be mobilising Rs 7.25 trillion revenue and Rs 1.71 trillion  foreign assistance. "The government is anticipated to raise Rs 996.15 billion in domestic debt to meet the budget deficit," the plan estimated. "The federal government will transfer Rs 1.7 trillion budget to provincial and local governments in next five-year period."
Similarly, the plan projects an investment of Rs 9.25 trillion, of which private sector will pour in 55.5 per cent of investment and government investment at 39.1 per cent, apart from 5.4 per cent investment is expected to come from the cooperative sector.

Finance minister unveils post earthquake reconstruction budget of Rs 819.47 billion

Finance Minister Dr Ram Sharan Mahat today presented a post-disaster reconstruction budget of Rs 819.47 billion for the next fiscal year 2015-16.
Presentation the budget at the Legislature Parliament, Mahat said that budget for the next fiscal year is 32.6 per cent more than the budget for the current fiscal year. "The government plans to mobilise Rs 475.01 billion (59 per cent) from revenue, Rs 2 billion from principal repayment, Rs 110.93 billion (14 per cent) from foreign grant, Rs 88 billion (11 per cent) from internal borrowing, and Rs 94.96 billion (12 per cent) from foreign loans," he said, adding that the current fiscal year's savings of Rs 48.56 billion will also be used to fund the budget. "The savings from the current fiscal year and principal repayment will make up four per cent."
The expansionary budget has earmarked Rs 484.27 billion (59.1 per cent) for recurrent expenditure, Rs 208.87 billion (25.5 per cent) for capital expenditure and Rs 126.33 billion (15.4 per cent) for financial management provisions.
With priority for reconstruction – after the devastating earthquake of April 25 and subsequent aftershocks – the budget aims to boost people’s confidence on government by prioritising relief, reconstruction and rehabilitation works in the aftermath of the devastating quake, he said, adding that the government has allocated Rs 74 billion for the National Reconstruction Fund, while Rs 17 billion is provided directedly to the concerned authorities until Reconstruction Authorities comes into operation. "The government will not let people of earthquake-hit region feel lack of budget."
Urging private sector to cooperate with the government in reconstruction campaign, Mahat said that National Reconstruction Authority will be given a full shape soon. Pledging to train government staff for disaster management, he said that heritage sites will be prioritised during the reconstruction to revive tourism. "The government will leave no stone unturned to revive tourism," he added.
The socialism-tilted budget – unlikely from Mahat's past six budgets – aims at exploiting internal resources to its maximum, progressing in economic and social index, effectively completing the reconstruction work by issuing reconstruction bonds, Mahat said presenting his seventh budget. The budget has doubled senior citizen allowance to Rs 1,000 per month from Rs 500, he added.
Likewise, the budget promised to train as many as 50,000 youth for reconstruction work.
It will help create employment opportunities, he said, adding that the government will also organise an Investment Conference in the next fiscal year to promote foreign investment.
Minister Mahat said the government is likely to mobilse only 93 per cent of the revenue target for the current fiscal year, due to the devastating earthquake of April 25. "The earthquake is likely to increase poverty," he said, adding that the government will, however, try to restrict it to 25 per cent. "The government is facing a serious challenge to maintain economic growth rate above eight per cent to graduate from the least developed countries (LDC) to the developing country by 2022."
However, the budget has targeted six per cent economic growth for the next fiscal year.
The budget has also pledged its support to Constituent Assembly (CA) for fast-track constitution writing and holding of local body elections, apart from supporting cement industry for access road construction, completing construction of Postal Highway within the next five years, continuing multi-year contract system, and arranging additional budget for projects and programmes facing budget deficiency on basis of their work progress.
Earlier, a meeting of the cabinet in the afternoon has endorsed the budget for the next fiscal year before presenting it to the House.

Capital expenditure stands at Rs 9 billion only by December end

Despite timely budget for the current fiscal year 2013-14, the government has not been able to expedite capital expenditure.

As of January 1, the government has been able to spend only Rs 9 billion on development works – that is capital expenditure – that could have propelled economic growth apart from creating employment.

The budget for the current fiscal year 2013-14 has allocated Rs 85.10 under capital expenditure to achieve 5.5 per cent economic growth target.

By the half of the fiscal year, the government has been able to spend only around 10 per cent of the capital expenditure means the remaining half of the fiscal could not consume the total budget allocated for development works.

The slow performance of the capital expenditure will hit the economic growth target of 5.5 per cent, though timely monsoon might give little hope to the economic growth.

The Rs 517.14-billion full-fledged budget for the current fiscal year, has allocated Rs 353.42 billion for recurrent expenditures – for the regular administrative costs, salary and perks – and Rs 78.72 billion for financial management.

The government has spent Rs 111 billion under the recurrent expenditures, and Rs 13 billion under financial management making the total spending to Rs 133 billion by January 1.

The recurrent expenditure has been spent almost one third as usual but it will not help fuel economic growth as only capital spending can help fuel growth.