July 22, 2014 Sujeev Shakya

Following Through

It would have been so much better if the Finance Minister had been allowed to present his budget a month and a half ago in the first week of June. Then, there would have been enough time to plan projects and start writing cheques. However, our people in politics could not think beyond the dole of the Rs 50 million they wanted for each constituency and like any other financial matter, there was consensus on providing Rs 10 million per constituency. The budget has been equated to doling out money to different projects and providing sops to different businesses. The political compulsion that each Finance Minister goes through makes him more of a mediator than a strategist. Furthermore, in an era of coalition politics, compromise has become the key word and can be used to cover up any deficiency.

Annual Ritual

Each year, before the budget, there is the usual set of rituals. There are people seeking different projects and programmes to be included in the budget and then there are the business folks, ranging from a plethora of associations to undeclared cartels, seeking to influence different decisions that will benefit them. In the run up to the budget, the action shifts to what can be done for whom rather than what needs to be done. Political pressure, returning favours for funding electoral campaigns and the need to maintain a socialist image makes the budget a document of convenience rather than a document of action.

While at the beginning, attempts will be made to dovetail it with long-term plans and five-year plans, as the negotiations intensify, the budget slowly emerges as a standalone document. Bureaucrats work very hard to get the document done but their efforts remain unappreciated. A single decision of a politician, who might not be able to distinguish between operating cost and capital cost but has a lot of importance in a political party, can make all their efforts go to waste. So we have to figure out a way to account for the interests of political parties, the private sector and development actors to go beyond this annual ritual.

The first annual budget of Nepal was less than Rs 20 million in the early 1950s and the outlay of the first five-year plan was just Rs 300 million. Compare that with the Rs 240 million spent by India on the Koshi Project and Rs 150 million on the Trishuli hydropower project. The budget outlay has increased dramatically from those small numbers. In 1990, the total tax revenue was Rs 8 billion and the expenditure Rs 23 billion. Today, the numbers have swelled drastically—total revenue was estimated to be about Rs 441 billion in 2014/15 and Rs 515 billion as expenditure. That is a nearly 55-time increase in revenue and a 24-time increase in expenditure in the past 25 years.

Broad Vision

From the time Ram Sharan Mahat presented the budget more than two decades ago until now, the numbers have changed. Big budget allocation makes political wrangling even more lucrative. Therefore, the time has come to redesign the budget process, have more people working on it and also ensure accountability on the money that is spent. We need more transparency in the disclosure of payments and more effort towards ensuring timely audits, along with taking corrective action. Furthermore, the Ministry of Finance needs more people in the process of budget making, control, evaluation and accountability.

Our ‘poverty-stricken’ mindset has resulted in a myopic vision set on finding money to distribute and follow distributive economics. We have not yet begun to think that now that the government coffers have swelled, we need to manage it more professionally. The Nepal Telecommunication Authority earns over Rs 3 billion in licence fees each year; the Ministry of Foreign Affairs itself has more than Rs 8 billion to manage; and the Ministry of Civil Aviation earns more than Rs 3.5 billion as just revenue. These need to be seen as profit-making ventures and not treated in the same breath as cost centres. Is it not appalling that the staff at the Tribhuvan International Airport actually earns bonuses?

Action, not Words

The 2014/15 budget pushes for economic reforms and as Finance Minister Mahat says, the key is investment. Laws, structures and mindsets all have to be investment friendly. Political wrangling in trying to disband the Investment Board Nepal (IBN) has to stop. The Board has built its capacity to deal with big projects and it should continue to be empowered. Ministers, political and business leaders should stop expressing their views about disbanding the IBN, either in private or public.

This fiscal year, even if Nepal can make two to three big projects happen, it will send a good signal to the outside world that Nepal is a serious place to do business. The global interest that is sitting on the fences will actually plunge in to take the risk. The onus lies on us.

After the budget, we will hear of comments and analyses that vanish until the next year. There are institutions that have budgets allocated to a programme just to analyse the national budget. But the discourse on economic thinking has to go beyond the budget. Professional organisations, many business associations and think tanks are busy moving from one election to another without contributing much to the discourse on economic issues. There has to be more discussion in the public domain on the efficacy and accountability of money set out in the budget. Nepal needs more people who are keen to analyse economic issues and create more research and policy suggestions. We need more young Nepalis taking up the job of economic analysts. There has to be a departure from people who just want to have a photo-op with political figures.

The budget this year has given an indication of areas that can be pursued, but we need real action to convert intent into reality.

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