The parliamentary Finance Committee on Thursday recommended the government to announce a financial package worth 5 percent of the country's GDP through the upcoming budget to offset the negative impact from the Covid-19 outbreak and keep the country’s economy afloat.

This translates to a financial package worth Rs 188 billion. The budget for the fiscal year 2020-21 is slated to be presented on May 28.

The livelihoods of tens of thousands of people have been badly hit by the pandemic, particularly the poor and migrant workers, many of whom have lost their jobs.

On Sunday, the government decided to extend the lockdown that has been in force since March 24 till June 2, continuing to suspend ground and air travel, shutting down most businesses and industries except medical goods, food items and construction.

The Central Bureau of Statistics said recently that Nepal's economy would likely grow at a rate of 2.27 percent this fiscal year, way below the government's targeted 8.5 percent.

The optimism is based on the assumption that some sectors like manufacturing will stabilise after mid-May.

But economists say Nepal's economy is headed for a catastrophe with no end in sight to the months-long paralysis as the virus lockdown keeps getting extended.

They fear the Covid-19 closures could trigger unpredictable consequences even as forecasters struggle to figure out where the country's economy stands now. Some economists project an economic growth rate of 1 percent for this fiscal year, but say that it will not go into negative territory.

Despite calls from economists to not increase the upcoming budget from the current fiscal year’s figure, the Finance Committee said that the resource committee had already fixed the budget ceiling of around Rs 1.7 trillion for the next fiscal year before the pandemic and it was not possible to reduce the size of the budget. The budget for the current fiscal year is Rs 1.5 trillion.

"As the government has to provide relief to the industries, businesses and workers affected by the virus, a bigger budget seems to be necessary," the committee said.

The committee has also suggested Finance Minister Yubaraj Khatiwada set a target of raising revenue worth Rs 1 trillion without increasing the tax rate.

The committee has suggested mobilising bilateral and multilateral foreign aid worth Rs 1 trillion and internal loans equivalent to 6 percent of the GDP. The deficit amount should be mobilised through the foreign loan, it said.

As most of the workers in the industrial and business enterprises have become jobless, the committee has suggested that the government pay one-third of their salaries and one-third by the industries and enterprises. In this plan, workers will receive reduced salaries, about one-third less than their usual.

The committee has suggested providing relief and concessions to the most affected hotels, restaurants, tourism businesses and public transport that cannot come into operation immediately.

The committee has suggested to accord high priority for health and agriculture in the upcoming budget.

The committee has suggested that all three governments — federal, provincial and local — should prepare health infrastructure in a coordinated manner by allocating 10 percent of their budget for the prevention, control and treatment of coronavirus.

The committee has suggested allocating at least 15 percent of the total budget for the agriculture sector for its commercialisation and modernisation.

The committee has suggested making arrangements in the budget to provide subsidy for fertilisers and seeds. It also suggested providing at least 50 percent subsidies for the purchase of agricultural tools. The committee also suggested that the government should fix the minimum support prices of key agriculture products before planting.