Nepal’s budget: Not quite all thereThough the government seems to have its heart in the right place, the plans and allocations announced are underwhelming.
The budget for the fiscal year 2020-21 is in. This budget is the third one under the current government—a mid-point of sorts that will mark the larger programmes that could be completed before the next elections in two years. But it is also an important indicator to gauge how the government plans to tackle the emergency currently upending the world, namely the Covid-19 crisis. Therefore, it becomes especially important to analyse the sectoral budgets and accompanying programmes announced.
To be sure, the government seems to have rightly kept the response to the pandemic at the heart of next fiscal year’s budget. In announcing his belief that Nepal will bounce back from this crisis, Finance Minister Yubaraj Khatiwada announced the intent to mobilise up to Rs1.93 trillion in internal debt to accommodate the plans announced. He also announced that economic recovery and the health sector were priorities. However, as in the past two budgets, the government has used this important platform to push through some unrealistic programmes and policies. Moreover, some fund allocations seem far fetched or suspect.
Take the crucial sector of healthcare, for example. The current fiscal budget allocated a little over Rs68 billion for the health sector. Now, that has been increased to Rs90.69 billion for the upcoming fiscal year. While the budget itself has increased by over Rs20 billion, the government has planned too many programmes but hasn’t balanced funding proportionally. Healthcare and public health were already underfunded in the country, with this government in the past failing to provide the services it had promised. Some of these unkept promises include the safe motherhood programme, telemedicine and pharmaceutical and treatment subsidies to the elderly.
Now, the budget promises the mobilisation of resources to build 200 new hospitals at all local levels, nevermind the already crumbling health facilities. Khatiwada also announced special healthcare facilities to accommodate infectious diseases, with Kathmandu getting a new centre with 250 ICU beds, while each provincial capital getting centres with 50 ICU beds each. These infrastructure projects will take at least 12.46 billion from the health budget, leaving very little left of the Rs20 billion added this year for other special projects such as double allowances for female health workers, new diagnostic and telemedicine facilities and Rs500,000 insurance for each and every health worker. In other words, there isn’t much left to strengthen the current infrastructure and programmes that needed immediate attention.
In education too, the budget is lacking. The budget for education, science and technology has only slightly increased, from just over Rs163 billion for this fiscal to just over Rs171 billion for the next. The standard global practice has been to allocate at least 20 percent of the national budget on education; like the previous two years, the allocation still falls short by a large amount. Only 26 percent of 7,553 educational institutions damaged during the earthquake have been reconstructed and only around 8,000 of over 20,000 public schools have the most basic required infrastructure. With such a paltry budgetary increase, the government’s plans to mobilise vast resources to fill the gap in teacher numbers, to construct 1,000 new computer and science laboratories, and to boost remote or community education during the current crisis fall short. How is the government, which is allocating Rs6 billion of this sectoral budget to the President’s special budget, and which has announced a quarter of the budget to be put forward for scholarships, expecting to even hold the education system together for one more year? This, without even the criticism it deserves for announcing one more university when so many active ones are failing.
The government has also failed to announce anything that will cheer up the private sector. Given the potential small businesses and start-ups have in boosting employment, the government allocated a paltry Rs500 million to fund investments in such businesses. Surprisingly, this ‘fund’ is not an equity investment but a soft loan, charged at 2 percent interest. The spending allocated for new industrial villages—over Rs2 billion—will not cheer industrial organisations currently operating which have hardly received any relief measures, even during the current economic slowdown.
Though some announcements have been disappointing, it is a welcome move that the government has at least set its sights on boosting domestic agriculture and current infrastructure projects. It has also announced a renewed focus on community cold storage and access to food. If all its policies and plans are implemented well, it would still be a welcome development. But another major issue that continues to haunt Nepal is the improper discharging of the budget itself. The federal government, and most provincial governments, failed to spend even 20 percent of their capital budget allocation for the first half of the fiscal year 2019-20. Year after year, successive governments have failed to implement effective policies in time.
As a result, most of the capital budget remains unspent until the last quarter of the fiscal year. Then, when the unspent money raises the risk of future budget shrinkages, the government in power rushes to allocate the money to new budgetary headings, essentially wasting the money on useless developments, while the original programmes allocated remain underfunded and incomplete. This year, the government cannot delay allocated expenditures. The entire economic recovery plan may hinge on proper and timely spending.