Taking the impacts of the Covid-19 pandemic into account, the upcoming federal budget will not be introducing many new infrastructure projects but will prioritise employment generation instead, according to officials involved in budget preparation. 

The government is busy preparing the budget for the 2020-21 fiscal year, which needs to be presented to the federal parliament on May 29, as per the constitution.

Officials said that besides reprioritising some sectors, the new budget is less likely to accommodate new projects, given limited resources in the wake of the Covid 19 pandemic and the negative impact of the lockdown on revenue collection, as well as an anticipated decline in foreign aid, particularly from bilateral donors. According to the Development Cooperation Report 2018-19, foreign aid constituted 24 percent of last year’s total budget.

“There is now a need to create employment opportunities for the workforce that enters the market every year, those who’ve lost jobs, and potential returnees from abroad amid economic crises in destination countries,” said Pushpa Raj Kadel, vice-chair of the National Planning Commission. “The budget will thus focus on creating employment through both the government and the private sector to address the unemployment crisis.”

According to Kadel, employment generating programmes, especially those that require mass mobilisation, will be prioritised, like the Prime Minister’s Employment Programme and the River Control Programme. Both these programmes have been designed to generate mass employment.

“Not only the federal government but provincial and local governments are also expected to introduce plans to promote local employment,” said Kadel.

According to the Nepal Labour Force Survey 2018-19, an estimated 908,000 people, out of a total labour force of 7.08 million, are without jobs. Even among the employed, 39.3 percent are underemployed. Every year, about 500,000 individuals enter the labour market. The unemployment rate currently stands at 11.4 percent, according to the survey.

But the ongoing Covid-19 pandemic and the subsequent lockdown have already put many workers out of jobs. Over one million jobs are already at risk due to the severe impact of Covid-19 on the tourism sector alone.

According to estimates from the International Labour Organisation, nearly 25 million jobs could be lost worldwide as a result of the pandemic.

Nepal is also looking at a severe employment crisis as millions of Nepalis who are currently working in foreign lands return home after losing jobs as economies around the world go into recession.

Over 1.5 million Nepalis are estimated to be working in Malaysia, Qatar, Saudi Arabia, the United Arab Emirates and Kuwait while 3 to 4 million Nepalis are estimated to be living and working in India, according to the Migration in Nepal Report prepared by the International Organization for Migration.

The government has formed a task force headed by National Planning Commission member Ram Kumar Phuyal to study the impact of Covid-19 on foreign employment and remittance, and measures to be taken to employ returning migrants at home.

While the task force has yet to come up with a report, Min Bahadur Shahi, a member of the planning commission, said that at least 600,000 to 700,000 Nepalis are expected to return due to reduced job opportunities abroad, as per an initial estimate.

According to Shahi, the budget will come up with measures to encourage their participation in commercial agriculture and small- and medium-scale enterprises.

Considering the impending return of migrant workers, the Ministry of Industry, Commerce and Supply has also formed a task force to prepare a plan to develop entrepreneurship skills at the local level.

With tens of thousands of migrants expected to return, Nepal is also looking at a significant shortfall in remittance, which has long remained the country’s primary source of foreign exchange reserves. Last fiscal year alone, migrants sent home Rs879 billion in remittance, equivalent to 26 percent of the country’s gross domestic product, according to Nepal Rastra Bank.

The Central Bureau of Statistics said last week that the inflow of remittance is expected to decrease by Rs163 billion year on year.

In order to offset this drop in remittance, the upcoming budget will prioritise exports and import substitution, considering that Nepal needs adequate foreign exchange reserves to sustain the import of vital goods and services, said planning commission member Phuyal.

Considering the large number of workers looking at layoffs in the tourism sector, the government also plans to promote domestic tourism through the budget, according to Phuyal.

In addition to employment generation programmes, the budget will renew the government’s focus on health, education, agriculture, and improving infrastructure to better public service delivery, said officials.

“Although health and education sectors have continued to remain our priority, they have not been backed by funding in recent years due to increased focus on physical infrastructure,” said Kadel. “We will focus on these sectors with more resources as the Covid-19 pandemic has shown that infrastructure in these sectors is lacking.”

The budget, however, will not just look to increase the number of health institutions across the country but will rather focus on equipping existing hospitals and health posts with proper infrastructure and equipment, said Kadel.

The Covid-19 pandemic has exposed the poor state of Nepal’s health infrastructure as very few laboratories across the country are equipped to carry out tests for the coronavirus. Even large public hospitals in the Capital do not have the required quarantine facilities and the wherewithal to house many Covid-19 patients.

With inadequate revenue collection and a possible reduction in foreign aid, Nepal is not likely to be able to take up new large-scale infrastructure projects or provide adequate relief packages for hard-hit sectors, especially tourism and aviation.

The government is looking for funds between Rs69 billion and Rs104 billion, equivalent to 2 to 3 percent of the country’s GDP, from donors to bridge the resource gap, say officials. However, it is uncertain whether these funds will materialise, given that the economies of many donor countries have taken a beating due to the pandemic.

Given the challenges in generating enough resources, there will not be a big jump in budget size, said Kadel. The budget for the current fiscal year is Rs1.53 trillion, 17 percent larger than the preceding year’s.