Budget allocation not satisfactory: Economists

KATHMANDU, July 21:

Economists have said that the budget for fiscal year 2014/15 failed to allocate resources efficiently.

Speaking at a program organized jointly by the Nepal Economic Association and Nepal Bankers Association (NBA) on Monday, senior economist Bishwambher Pyakuryal said the allocation of Rs 50 million for each election constituency without proper guidelines is a blunder. “The amount that goes to election constituencies will be good-for-nothing,”

Pyakuryal said, questioning, “How we can expect effective use of resources when there is no guideline to regulate the expenditure?”

He also said the budget has deviated from the federal concept. “The government has failed to address the issue of federalism which the country is adopting soon as per the interim constitution,” Pyakuryal added. He also said the government has allocated budget even for projects whose detailed design is not ready. “Large chunk of capital budget is spent on the last three months of the fiscal year which doesn´t give any output,” he added.

Pyakuryal, however, appreciated the long-term vision of graduating the country to the league of developing countries and announcement of reforms in legal front.

Similarly, former vice chairman of National Planning Commission (NPC) Prithivi Raj Ligal said the finance minister has set a wrong precedence by transferring last year´s savings (Rs 18.5 billion) under revenue heading.

Economist Madan Dahal also said that budget cannot address deep-rooted problems of Nepali economy like high production cost, subsistence agriculture and foreign dependency. He also expressed doubt on implementation of plans and programs mentioned in the budget. “The government has announced to end load-shedding within three years. But the programs for energy development mentioned in the budget is difficult to implement,” Dahal said, adding that the trend of allocating more resources to the election constituencies of political big-wigs has not ended.

Former member of NPC Pushpa Sharma said the success of the budget will be determined by the implementation of plans and programs mentioned in the budget.

´FISCAL AND MONETARY POLICY NOT IN SYNC´

Economists have argued that the monetary policy is not in sync with the fiscal policy.

“The monetary policy does not support the expansionary fiscal policy,” Rewat Bahadur Karki, member of the Securities Board of Nepal (Sebon) - the capital market regulator - said.

 “The central bank had reduced the cash reserve ratio (CRR) in the election year last year when additional money flows into the market. This year it tightened the CRR when there would be more credit demand,” he said, adding that the monetary policy cannot tame inflation.

Speaking at the program, NBA President Rajan Singh Bhandari said policy inconsistency has left bankers puzzled. “Fiscal policy says the government will subsidize the four percent interest rate of agriculture lending. However, the monetary policy says the government will provide refinancing for agriculture loans,” Bhandari added.

Source: Republica