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Interim Budget & Economic Situation in Nepal

Issue 29, July 20, 2008

By Siddhi B. Ranjitkar

Finance Minister of the caretaker government headed by Prime Minister Girija Prasad Koirala presented an interim budget called a supplementary budget of Rs 73.54 for the first quarter of the fiscal year 2008 to the Constituent Assembly (CA) on Monday, July 14, 2008. The caretaker government is not supposed to present a full-fledged budget, as it cannot formulate an economic policy of the country for the fiscal year. However, some so-called Nepalese industrialists and CA members knowingly or unknowingly criticized the government for not presenting a full-fledged budget. Finance Minister of soon-to-be-formed government will present a full-fledged budget following its economic policy.

The CA approved the interim budget unanimously on the same day the Finance Minister presented it. With this budget the administration can perform its duties for at least three months of the fiscal year starting on July 16, 2008.

Finance Minister Dr. Ram Sharan Mahat painted a very rosy picture of the economic performances in the fiscal year 2007. He said that the target for collecting revenue was Rs 103 billion in the fiscal year 2007, and the revised estimated target for the same was Rs 107 billon, which he said has been higher by 22 percent since the fiscal year 1995. Dr. Mahat also said that the GDP growth was 5.6 per cent in the fiscal year 2007; it was the highest in the last seven years. The growth of the agriculture sector was 5.65 per cent and of the non-agriculture was 5.57 per cent in the fiscal year 2007. Dr. Mahat boasted that he was going to leave a sound economy to an incoming new finance minister.

The Finance Minister’s claim for the economic growth has been despite the government’s failure of resolving the problem of short supply of petroleum products for almost two years severely hitting the manufacturing sector of the economy and pushing down its growth to 0.18 percent if it were not a negative. The manufacturing sector has also faced the labor problems. A number of manufacturing units has been either closed or shifted out of the country causing the rise in unemployment both in the fiscal y 2007 and a year before. The almost daily occurrence of traffic shutdown in one area or another sometimes in the entire country has also hit the performance of the economy.

Some economic analysts asked how the rosy figures presented in the report on the economic survey of the fiscal year and the sound economy boasted by Dr. Mahat come true against the so disastrous situation for the economic growth in the country not only in the fiscal year 2007 but also during the two year period of the administration of Prime Minister Girija Prasad Koirala.

In 1995 the then-Finance Minister Bharat Mohan Adhikari of the government headed by Prime Minister Man Mohan Adhikari of the Communist Party of Nepal-Unified Marxist and Leninist (CPN-UML) painted a very rosy picture of the economy. At that time many economists including Dr. Ram Sharan Mahat suspected that the then-Finance Minister must have cooked the data to give such a good performance of the economy.

On July 16, 2008, Former Member of the National Planning Commission, Dr. Shanker Sharma speaking on the Radio Nepal in the morning program called ‘Antar Sambad’ told the radio listeners that the verification of the progress reports submitted by the district officers was the very hard job to do as the monitoring officers have neither the incentive to go to the field nor they could reach the areas easily. In these circumstances, would not be the figures Dr. Ram Sharan Mahat presented to the CA members picked up from the ceiling if not cooked?

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