Waiting for budgetSetting ambitious growth rate is welcome, but the govt’s major challenge is to deliver
The government on Monday presented its annual policies and programmes in the federal parliament, setting ambitious goals of doubling the per capita income in five years and making the country a middle income nation within a decade. The first ever annual policies of the federal government after the three-tier elections claim to lay the foundation for national prosperity, focusing mainly on economic prosperity through development in the sectors of agriculture, tourism, infrastructure, industries, technology and urban development. These policies and programmes are the bases for the government budget for the fiscal year 2018/19.
Pretty much similar to the goals set by the past government, the current programmes too have set the target for generating electricity and the completion of infrastructure projects like the building of airports and highways. Infrastructure projects related to railways is a new addition. While soaring rhetoric about growth and development is not bad in itself, the challenge is to deliver.
A protracted period of political transformation, from an absolute monarchy to multi-party democracy, straddled by an armed conflict and frequent changes in the government forced Nepal to get stuck in a low-growth trap for years. According to the 2017 World Bank report, in the past 45 years (1970-2014), Nepal grew at an average annual rate of 4 percent and the growth rate of per capita income was the lowest in South Asia. However, as of 2017/18 when the growth rate rose to 5.89 percent, the per capita income crossed the $1000 mark. Still, it’s only a sustained growth that is a significant indicator of a country’s economic health.
As per the Central Bureau of Statistics (CBS), the final consumption expenditure as a percentage of GDP in the final quarter of 2017/18 was at 85 percent while savings were at 15 percent. Saving is an income not spent. Political instability was the major constraint for private sector investment. But perhaps since the current government is largely projected to be a stable one, if these funds are channelised aggressively and efficiently with proper planning, economic growth could take off.
Policy decisions have long-term implications. The government should also have the people’s mandate to take such decisions—and the current government enjoys that. These policies and programs will be implemented post the allocation of budget. Institutionalising fiscal federalism will be a big challenge as it is necessary for the new tiers of the government to absorb the budget. Only through a result oriented budget that effectively spends its capital can the country break out of low-growth trap and can the government deliver on its promise of economic prosperity.