The upcoming federal budget needs to bring policies to promote the private sector investment that could create more job opportunities in the country, economists said on Monday.

The government should identify the areas of comparative advantage where it can attract private sector investment, they said, adding that such policy would increase the country’s output and narrow down the widening trade deficit—a major challenge facing the country.

Speaking at the ‘Pre-budget Discussion: Problems and Challenges’, Officiating President of the Nepal Economic Association Bhawani Dhungana said: “The ballooning imports cannot be reduced in a short run. The government has to focus on facilitating the private sector to invest so that they can produce and export.” Over the years, Nepal’s trade has been financed mainly by the foreign currency earned from the remittances. Slow growth rate in remittance has becoming a cause of concern.

The Trade and Export Promotion Centre statistics show that Nepal’s import bill amounted to Rs874.87 billion, up 20.4 percent at the end of the third quarter this fiscal year. In contrast, export earnings inched up 7.4 percent to Rs59.61 billion. As a result, the country’s trade deficit swelled 21.5 percent to Rs815.26 billion.

Shivraj Adhikari, executive member of the association, presenting a paper said the country has failed to achieve the structural transformation mainly in the service sector. “The unrealistic growth in the service sector has given rise to the problems such as skewed information, money laundering and increased informal activities. This has led to the market failure,” Adhikari said.

According to him, the service sector has failed to propel the investment as it is focused only on wholesale and retail markets. “This has resulted in high transaction and production costs, low productivity and negative relationship between the investment and trade volume,” Adhikari added. Economists also criticised the use of fund under Constituency Infrastructure Special Programme. Members of Parliament have been asking the government to increase the fund to Rs100 million from Rs30 million for each constituency. According to the economists, the programme could aggravate the inequality as it would hardly benefit the poor in the rural areas.

Calling for the budget that focuses on the development of infrastructure, Economist Madan Kumar Dahal urged the government to maintain the budget ceiling in accordance to the real GDP. The government authority should be accountable for low capital expenditure, he said.