The budget session of the Federal Parliament of Nepal for the upcoming budget for the fiscal year 2077-78 is summoned. It is necessary to discuss the principles of budgets in the parliament as per the constitutional and legal provisions. Expectations are higher as the is government planning to bring economic relief packages in response to the Covid-19 hit economy.
This pandemic has been severely affecting the economy as well as human lives and continues to do so on a global scale. The economic and social sectors have been deeply affected regarding the possibility of Unemployment, Poverty, Hunger, and decline in overall wellbeing. International organizations such as the UN, ILO, WB have projected the cyclic effect of the pandemic which may last from semi-annual to annual terms predicting the downturn of World economic growth by 3 % and likely to face a similar financial crisis like the great depression of the 1930s. Likewise, one-third of the world trade will be declined with more than 125 million full-time workers likely to lose their jobs.
A direct impact has been felt in the national economy regarding business, production, and distribution. During the lockdown period, economic and social sectors have been fully halted and will continue to do with decreased revenue collection and few economic activities. It is unlikely that there will be any economic growth this year with the decline of total GDP by 3-4 billion which includes the agriculture, construction, services, industries, trade, and tourism sectors in particular. The IMF and WB have projected that the previously expected economic growth of 8% is unlikely with economic growth likely to only reach 1-2%. Revenue collection is a challenge in itself as an import-based revenue mechanism is practiced. Moreover, Capital expenditure will not exceed 50%. Likewise, a decrease in the inflow of remittance, Foreign aid, grants, and loans is likely to seriously affect the foreign exchange reserves and balance of payment (BOP).
Regarding above mentioned economic scenario, it is necessary to overcome the different forms of challenges The main challenge lies in addressing the livelihood management of daily wages workers of about 3-4 million with no works during the lockdown period which can be overcome by providing relief from social security and national welfare fund.
Similarly, the agriculture-based business including production and livestock, micro and mini levels industries, Businesses, Tourism sector are facing similar economic crises too. Most of these sectors have been operating on ‘debt financing’ rather than self-financing which has made it difficult for payment of timely wages to the employees and payment of debts of the banks and debtors. As projected, the cyclic effect upon the economy due to coronavirus may last up to a year or so with damage to about 4-6 billion dollars. The upcoming budget certainly must make attempts to recover from such a crisis to revive the shrinking economy.
For the effective formulation of the upcoming budget, following measures must be considered.
Firstly, Relief Distribution and Upliftment of Agricultural Sector: For Effective relief distribution and upliftment of Agricultural sectors, the data regarding daily wage workers must be updated with the help of related Ministry, CBS and local governments and provide identity cards so relief can be effectively distributed for a certain time being and until guarantee of regular employment. Similarly, for businesses, the interest payment period should be extended with loan subsidies and rescheduling. The agricultural productivity must be increased by the adoption of modern farming methods prioritizing special economic zones.
Secondly, creating effective Employment opportunities: More than 3 million active populations are likely to become unemployed in the current trend. The government’s intention to bring back foreign employees will create more unemployment for the existing one. Therefore, the targeted group of people must be identified and provided them with skills and training with the help of CTEVT and Skill development programs. Workshops must be conducted at all local government levels to enable the local level skill-oriented business. After the attainment of the training, a soft loan scheme must be provided by the government to run their own desired business. Subsidies through banks for the purchase of seeds, Agricultural tools, and fertilizers must be provided to the farmers.
Thirdly, Increment in Investment in Health and education: The Government must allocate about 15-20% of the total budget to health and education sectors. Health centers must be renovated with uplifted capacity by employing greater no. of health personnel. Highly facilitated hospital has become the need of the time at local levels. Similarly, higher education must be now polytechnical oriented in order to guarantee jobs within the country and prevent millions of active populations going abroad for expensive higher education and prevent the brain drain.
Fourthly, Regulation and Restructuring of PEs: Public enterprise is the backbone of the socialist economy. The need for public enterprise is being felt more than ever regarding the present crisis for public service delivery such as food, water, fuel, electricity, and others. In particular, agriculture, service, profit, and social welfare-based enterprise must be made efficient with capacity enhancement and effective production methods. Through an increase in capital and by merging similar nature of enterprises, the stability of such enterprises can be expected and become economically competent as suggested by high-level reformation committee reports on public enterprises.
Lastly, Cutting Down Unnecessary Public Expenses: The trend of unnecessary political recruitments must be stopped to prevent unnecessary and unproductive administrative expenses. Political appointment of advisors, experts and personal assistants must be discouraged replacing them with competent bureaucratic personnel to avoid unnecessary administrative expenses. NPM approaches such as lean and swift structure, use of technology and information communication, effective monitoring and evaluation system must be implemented for effective control of administrative expenses.
According to the constitution, the economic objective of the state is to attain the Socialism oriented economy with equitable distribution of resources and means. Therefore, the upcoming budget should address all the socio-economic sectors ensuring participation of cooperatives, public and private sectors and by addressing the socio-economic impacts of Covid-19 in a holistic approach
(Author is a student pursuing his Masters in International Relation and Diplomacy at Tribhuwan University, Nepal)