Despite the nationwide lockdown, purportedly imposed to contain the spread of the novel coronavirus, still being enforced, the budget session of the federal parliament commenced last Friday. It is now deliberating on pre-budget issues that will largely set the government's policy and programme priorities for the next fiscal year that begins July 15. As per Article 119(3) of the constitution, the federal government must present the national budget in the federal parliament on Jestha 15 (May 28).

These are extraordinary times; the entire world is in the suffocating grip of the pandemic. Apart from the risk of virus contagion and the fear for life itself, the economic ramifications of extended lockdowns throughout the world have brought nearly all economic activities and supply chains to a grinding halt. For a country like Nepal, an economy of barely $30 billion, where more than two-thirds of foreign currency earnings is dependant on the inflow of remittances from migrant workers and almost eighty percent of supplies are dependant on imports, the crisis comes as a double whammy, risking both macroeconomic stability and the livelihood of the masses.

It is obvious that the formulation of the annual budget under such economic uncertainties is an arduous task. Ideally, to navigate the country out of rough waters, the government has but no alternative to demonstrate its political acumen to create state-level synergy, respect the state systems while taking key decisions, take key stakeholders into confidence in devising crisis stimulus schemes and set right priorities, for both best and worst case scenarios of virus containment, in the upcoming budget.

Sadly, the government's preference for callousness and isolationism over sensitivity and cooperation as its modus operandi has not only resulted in the containment measures causing mayhem but it has also raised apprehensions about whether the upcoming budget will be able to rescue and rehabilitate the economy.

Political diversion

At this very critical juncture, when all political forces have to be united to battle against the Covid-19, the ruling Nepal Communist Party itself is mired in an internal power struggle. Prime Minister KP Oli already is said to have lost his majority, both in the party Standing Committee and the parliamentary party. He is resorting to delaying the Standing Committee meeting that a majority of its members demanded in writing. The opposition parties in unison are not only criticising the government for not concentrating effectively in taking adequate measures, such as nationwide testing, but contending that the prime minister has already lost the political as well as moral authority to govern the country. Instead of fostering political unity across the parties, Oli publicly asserted that one of two ordinances, which he was forced to withdraw within four days of its enforcement the previous week, was meant to break 'other political parties'.

As the prime minister is forced to walk the tightrope to save his government, one of the obvious pitfalls will be at the forthcoming budget. Instead of introducing crisis-induced austerities, it risks being a pork-barrel once again. The signals are abundant. There is pressure coming from all quarters to drop the allocation to the parliamentarians' development fund, which soaks about twenty billion rupees every year from the federal coffers alone, and to the provincial reserve funds. But the prime minister is less likely to take this risk, fearing the defection of some parliamentarians of his own party from his fold. Similarly, he is reluctant to take action on the ministers that have performed miserably in managing the crisis, including those who are widely known to have been involved in defalcation of public funds in the procurement of necessary medical equipment.

State mechanism

Articles 50(1) and 51(2) of the constitution have recognised Nepal's polity to be 'cooperative federalism'. The federalism literature unambiguously defines cooperative federalism as 'a vision of independent governments working together to implement the policies of the federal state’. But the federal government is neither recognising the existence of 'independent' sub-national governments nor has shown sincerity to work together. The provincial governments (let alone the local level) are left to keep guessing what the new budget will have in store. Whereas, the sub-national governments are required and expected to work at the frontline of the Covid-19 crisis, including in managing the quarantine, immediate relief, rescue and arranging for testing and diagnosis. Generally, the federal government continues to treat the sub-national governments merely as the order-takers without any meaningful say or share in national policy formulations, including the drafting of the new fiscal bill. Therefore, the core of Nepal's federalism not only ceases to be cooperative as envisaged in the constitution but the government seems determined to annihilate the very idea of federalism. This will soon reduce the independent sub-national governments into incessant compliant machines for lack of recognition of their due place and required resources to assert their operational independence. Such penchant for centralist government, in turn, will only exacerbate the effects of the crises like the coronavirus.

Stakeholders and priorities

The cabinet meeting last week decided to relax the lockdown for the industries and banks to operate. But, there was a clear lack of coordination among the ministries like the finance, industry and home affairs. The workers and employees were not facilitated by the security forces to reach their work stations. The infrastructures in the workplaces were simply not enough to maintain the required social distancing to prevent virus transmission. Worse, the stakeholders, like the umbrella organisation of the business communities, were not consulted to make these arrangements implementable. Similar monolithic attitudes are dominant in the government in devising relief, support and stimulus packages both for citizens and businesses. The key stakeholders have already mocked whatever the government has announced in the name of relief measures.

Given the gravity of the situation, the new budget needs to be entirely reprioritised. This can only be done through extensive, nationwide consultations and stock-taking of rapidly evolving new health and economic realities. To a large extent, the new budget must possess adequate flexibility for reallocation as how the crisis would unfold in the near or long term is still unpredictable. Although there are some polemics in public as to how the next budget must look like, the government seems to be highly reluctant to listen and consider the suggestions that have come forth—primarily to refocus allocations towards consolidating healthcare infrastructures, modernising agriculture, generating employment opportunities, preventing the disruption of supply chains and introducing gradual but substantive measures for import substitutions, at least of those goods and services that Nepal can produce with last-mile support from the government. 

***

What do you think?

Dear reader, we’d like to hear from you. We regularly publish letters to the editor on contemporary issues or direct responses to something the Post has recently published. Please send your letters to [email protected] with "Letter to the Editor" in the subject line. Please include your name, location, and a contact address so one of our editors can reach out to you.