Nepal Budget 2011/12 analysis

27 July, 2011

KATHMANDU, July 15 (Xinhua) -- The Ministry of Finance has released Nepal's budget Friday for the fiscal year 2011/12 starting July 16, 2011 and ending July 15, 2012.
The fiscal budget has been delayed in the past three years owing to several political problems.
Although the government had announced its commitment that it would announce the budget on time, the budget, which was to be announced on July 14, was delayed by a day following the impediment caused by the United Democratic Madhesi Front (UDMF).
The UDMF caused the obstruction citing that the government had failed to address the issue of the people of the terai region in southern Nepal.
However, on Friday the government signed a four-point agreement with the UDMF after which the budget was released by Deputy Prime Minister and Minister for Finance Bharat Mohan Adhikari.
The budget was leaked before it was announced which garnered huge criticism in the legislative parliament. Demands for strong action including resignation of the finance minister, were also made in the Legislature Parliament.
This was the first time in the history of parliament that the budget was leaked even before it was announced.
The budget has given high priority to the peace process and constitution writing.
Also, socio-economic transformation through high economic growth, controlling inflation, just distribution of yield aimed at reducing poverty and inequality, inclusive development, increasing employment opportunities and production and productivity increase in agriculture and industrial sectors have also been given equal priority.
The current budget has allocated almost 5 billion U.S. dollars as its expenses.
The economic growth rate for the current fiscal year is estimated to be 3.5 percent.
The average economic growth rate over the last three years was below 4.0 percent.
Inflation, which persisted at a double digit during the last two years, has come to a single digit in this year.
Establishment of the Peace, Formulation of Constitution and Sustainable Resolution of Conflict has been amongst the top priorities of the new budget.
With a view to set up an effective mechanism for the enhancement of investment in the energy sector by mobilizing domestic and external resources, the Hydropower Development and Investment Company, with a paid up capital of 0.1 billion dollars, has been registered.
In view of making transport services in urban roads including Kathmandu and highways more safe and comfortable through the implementation of regular, recurrent and casual maintenance, reconstruction and rehabilitation works in a planned manner, 0.04 billion dollars have been allocated.
The budget has also proposed the formation of the Central Revenue Board to make the revenue administration more autonomous and effective.
It has also laid emphasis on prevention of the Revenue Leakage and Controlling Illegal Imports.
As part of promoting the Private Sector and Reducing Cost of Doing Business the budget has announced that Income tax will be fully exempted for the first ten years for the hydro-power projects commencing their construction within August 24, 2014 and starting commercial production by mid-April 2018. Thereafter 50 percent income tax exemption for the next five years will be provided.
The existing pay scale ranging of the civil servants has been increased from 30.39 to 42.86 percent.
The budget also focuses on mobilizing foreign aid and utilizing it only for the programs and sectors of the national priority.
The budget has also announced the establishment of the National Youth Council to mobilize youths to join massively in the development activities, entrepreneurship development, awareness creating and against social mal-practices.
The budget also gives emphasis on the information and communications and science and technology by creating possibilities for new projects.
The budget has also announced to formulate and implement a New Health Policy in order to establish the health service as the fundamental right of the citizen.
Several Education and Literacy Campaigns are also the highlight of the new budget such as arrangement of providing free education up to grade 12 to all minority students and all girl students in the community schools.
The budget has also announced special facilities to be provided to exporters on agriculture products such as tea, coffee, cardamom, herbs, unseasonal vegetables products.
In terms of the financial sector and capital market, the budget has announced that measures related to liquidity management, reforms in the capital market, balanced expansion of banks and financial institution and control of financial crimes will be expedited. In this regard, corporate governance will be maintained to enhance trust upon banks and financial institutions.
The budget also declared that Nepal will be established as a model tourism country of the world within 15 years by developing it into the best tourism destination.
The budget has laid emphasis on all the major areas of development, whereas there have been criticisms citing that if the plans are not properly implemented and the key factor of peace and constitution building is not achieved, the budget might be a failure.