The government failed to pay pensions for Chaitra (mid March-mid April) to around 18,000 retired teachers of the government-run schools. This at a time when it has announced a Rs200,000 per head payout to all disqualified former Maoist combatants.

The finance ministry, which initially allocated an inadequate budget, failed to provide additional funds on time, leaving the Pension Management Office with no option but to discontinue pension payment to retired teachers.

“We didn’t release the pension for teachers of some urban areas, including Kathmandu Valley, Chitwan, Biratnagar, Bhairahawa, and Dang because of funds shortage,” said an official at the Pension Management Office on the condition of anonymity. “As pensioners living in urban areas have more options to earn, we prioritised providing pensions to those living in rural areas."

There are around 51,000 retired teachers, according to the Pension Management Office. Of them, 33,000 got the pension for the month of Chaitra while 18,000 pensioners could not be paid. “Due to the shortfall of around Rs400 million, we were unable to pay all the retired teachers," the official added.

The government spends around Rs1.25 billion on retired teachers every month, according to the pension office.

The official, however, said the pensions for Chaitra were provided to all other retired government staff of the civil service and security agencies—the Nepal Army, the Nepal Police, the Armed Police Force and the National Investigation Department.

Meanwhile, the government is ready to distribute double the amount of the budgetary shortfall in pensions to pay an ex-gratia amount to ex-combatants who were disqualified for integration into the Nepal Army for being underage or late recruits during the UN verification in 2007.

If the decision to pay the ex-combatants is implemented, it will cost the state around Rs800 million, based on an estimate that those claiming the relief amount could number up to 4,000.

“We are expecting around 2,000 applications from various districts,” Home Secretary Binod Singh told the Post on April 13. “Their numbers could go up to 4,000.”

Among the 4,008 combatants rejected for integration, 2,973 were minors, while 1,035 were recruited after the first ceasefire of May 26, 2006—just six months before the peace deal was signed.

Of around 19,000 Maoist fighters who had qualified for integration, only around 1,400 chose to join the Nepal Army and the rest preferred voluntary retirement. The government provided between Rs500,000 and Rs800,000 to each of those who opted for voluntary retirement.

A Cabinet meeting on March 20 had decided to provide cash relief to the disqualified members of the Maoist fighting force.

Earlier, a similar attempt was stalled by the Supreme Court after the Baburam Bhattarai-led government had decided to distribute Rs200,000 per head to the disqualified rebel fighters.

The government’s failure to provide pensions to all its retired employees and plans to pay the ruling party’s former combatants coincides with its financial crunch. The government is facing difficulties in revenue generation amid a slowdown in the economy.

As a result, it has been cutting the budget for various development projects since it is bound to pay its compulsory liabilities like salaries and pensions. Both salaries and pensions were increased by the government by 15 percent from the start of the current fiscal year 2022-23.

The earlier government of Sher Bahadur Deuba had also reduced the eligibility age to receive elderly allowance to 68 years from 70 years, increasing the number of beneficiaries which has led to an increased financial burden for the state.

“At a time when the overall economic situation of the country has been worsening, creating new liabilities for the government is really a bad decision,” said Padmini Pradhananga, president of Transparency International, Nepal, a corruption watchdog. “Where was the need for doling out cash to ex-combatants as they are already settled in life, one way or another over the last 15 years?”

She said the ex-combatants should themselves reject the cash handout given that the government will be forced to take loans to cover its liabilities for them.

“Distributing cash to ex-combatants when Prime Minister Pushpa Kamal Dahal is at the helm of the government also amounts to conflict of interest,” said Pradhananga.

Dahal had led a decade-long insurgency before entering into peace talks in 2006, which led to the end of the conflict. The conflict claimed more than 17,000 lives. The government’s move to create new liabilities has come at a time when it itself has announced austerity measures to cut its recurrent expenditure by 20 percent.

The government’s revenue collection is far less than what it collected in the last fiscal year, let alone meeting the set revenue target.

According to the Financial Comptroller General Office, the government collected Rs693.75 billion as of April 20 this fiscal year while the total collection of revenue by the same date last fiscal year was Rs800.51 billion.

According to the Department of Customs, it could collect only Rs285 billion against a target of Rs490 billion by mid-April this fiscal year. The collected amount was only 58 percent of the target. It had collected Rs371 billion in import revenue during the first nine months of the last fiscal year.

According to the Inland Revenue Department (IRD), collection of revenue under its offices as of mid-April stood at Rs337 billion which is less than Rs342.65 billion collected during the same period in the last fiscal year.

The situation forced the government to trim its expenditure plan (budget) for the current fiscal year 2022-23 by 13.59 percent through a mid-term review of the budget.

However, the government has not stopped creating new liabilities even though it is facing difficulty in paying its retired staff as well as construction contractors for the completed projects.

As pension is a compulsory liability of the state, the government will be required to arrange a budget, even if it means cutting its budget elsewhere.

The pension office, on its part, had sought around Rs17 billion to meet the resource gap.

“We need around Rs75 billion to distribute pensions in the current fiscal year against the budgetary allocation of around Rs55 billion,” Bishnu Prasad Kharel, chief of the Pension Management Office, told the Post in late January.

The pension official said that the finance ministry has notified that paperwork is currently being drawn up to provide an extra Rs4.75 billion.

Economic experts say the government creating new liabilities at a time of economic duress shows its misplaced priorities.

Nara Bahadur Thapa, former executive director of the Nepal Rastra Bank, said the government’s current priority should be to increase its own spending and encourage the private sector to make further investments.

“It is time to take the private sector into confidence and create a favourable environment for investment,” said Thapa.