Rs 384.9b budget sees co-ops as main pillar of economy
KATHMANDU, JUL 16 -
Amid heavy criticism from opposition parties for ‘leaking’ budget details, Deputy Prime Minister and Finance Minister Bharat Mohan Adhikari on Friday presented a budget of Rs 384.90 billion.
The finance minister proposed recurrent expenditure of Rs 266.61 billion, capital expenditure of Rs 72.61 billion and financing of Rs 25.38 billion.
For the first time, the budget has been appropriated under the heading of financing that goes as shares and loans. The government has allocated Rs 20.30 billion for principal payment (loan repayment).
Given the government’s failure to collect targeted revenue this fiscal year, the question arises whether the size of the budget was appropriate or whether it was inflated due to heavy hike in the salary of government employees.
“The government should not have introduced such an expansionary budget at a time when the government’s future is uncertain,” former finance secretary Rameshwor Khanal said. “The big sized budget may trigger inflation.”
The rise in the salary of government employees always leads to rise in inflation. The government has hiked the salary of government employees by 42.86 percent.
The rise in the spending power of government employees leads to higher demand in the market and prices go up. “This budget will of course trigger inflation,” said economist Dilliraj Khanal, who is close to the ruling UCPN (Maoist).
The government has not changed the income limit on which income tax would be exempted. The government had a tradition of increasing the income limit that would be exempted from tax. Given this, employees in the private sector and the self-employed will not get any relief.
Currently, the government has given tax exemption for income up to Rs 160,000 for a family and Rs 200,000 for a couple. The government imposes the social security tax of 1 percent on annual income.
The government aims to maintain the inflation at 7 percent. This looks challenging given the hefty rise in the government employees’ salary.
Despite a significant decline in activities that would block roads and vehicular movement, bad business environment as a result of load shedding and labour problems in industries and bad law and order situation will increase the cost of production of industries and subsequently see a rise in the prices of industrial goods.
“Maintaining the estimated inflation rate will be challenging,” said economist Bishwombher Pyakural.
The budget has targeted an economic growth of 5 percent this year, which is a modest target. However, meeting the target will be an uphill task if the private sector’s confidence is not given a boost.
For the past three years, economic growth has remained below 4 percent. The growth rate of the industrial sector has remained just 0.3 percent over the last five years. Maoist vice-chairman Baburam Bhattarai said there is nothing in the budget that can help meet the targeted economic growth.
The private sector is also suspicious about the government’s intentions, given the budget that advocates for a mixed economic policy instead of a liberal one and that prioritises the cooperatives instead of the private sector.
“The private sector has strong reservations over the reduction of its role,” said Bhaskar Raj Rajkarnikar, senior-vice president of Federation of Nepalese Chambers of Commerce and Industry.
The economic growth is estimated to be at 3.5 percent, largely due to the growth in the agriculture sector. If the sector does not fare well due to climatic conditions, the government will find it difficult to meet the desired economic growth.
Source: Republica
Amid heavy criticism from opposition parties for ‘leaking’ budget details, Deputy Prime Minister and Finance Minister Bharat Mohan Adhikari on Friday presented a budget of Rs 384.90 billion.
The finance minister proposed recurrent expenditure of Rs 266.61 billion, capital expenditure of Rs 72.61 billion and financing of Rs 25.38 billion.
For the first time, the budget has been appropriated under the heading of financing that goes as shares and loans. The government has allocated Rs 20.30 billion for principal payment (loan repayment).
Given the government’s failure to collect targeted revenue this fiscal year, the question arises whether the size of the budget was appropriate or whether it was inflated due to heavy hike in the salary of government employees.
“The government should not have introduced such an expansionary budget at a time when the government’s future is uncertain,” former finance secretary Rameshwor Khanal said. “The big sized budget may trigger inflation.”
The rise in the salary of government employees always leads to rise in inflation. The government has hiked the salary of government employees by 42.86 percent.
The rise in the spending power of government employees leads to higher demand in the market and prices go up. “This budget will of course trigger inflation,” said economist Dilliraj Khanal, who is close to the ruling UCPN (Maoist).
The government has not changed the income limit on which income tax would be exempted. The government had a tradition of increasing the income limit that would be exempted from tax. Given this, employees in the private sector and the self-employed will not get any relief.
Currently, the government has given tax exemption for income up to Rs 160,000 for a family and Rs 200,000 for a couple. The government imposes the social security tax of 1 percent on annual income.
The government aims to maintain the inflation at 7 percent. This looks challenging given the hefty rise in the government employees’ salary.
Despite a significant decline in activities that would block roads and vehicular movement, bad business environment as a result of load shedding and labour problems in industries and bad law and order situation will increase the cost of production of industries and subsequently see a rise in the prices of industrial goods.
“Maintaining the estimated inflation rate will be challenging,” said economist Bishwombher Pyakural.
The budget has targeted an economic growth of 5 percent this year, which is a modest target. However, meeting the target will be an uphill task if the private sector’s confidence is not given a boost.
For the past three years, economic growth has remained below 4 percent. The growth rate of the industrial sector has remained just 0.3 percent over the last five years. Maoist vice-chairman Baburam Bhattarai said there is nothing in the budget that can help meet the targeted economic growth.
The private sector is also suspicious about the government’s intentions, given the budget that advocates for a mixed economic policy instead of a liberal one and that prioritises the cooperatives instead of the private sector.
“The private sector has strong reservations over the reduction of its role,” said Bhaskar Raj Rajkarnikar, senior-vice president of Federation of Nepalese Chambers of Commerce and Industry.
The economic growth is estimated to be at 3.5 percent, largely due to the growth in the agriculture sector. If the sector does not fare well due to climatic conditions, the government will find it difficult to meet the desired economic growth.
Source: Republica
