The meaningless ritual of budget serofero

As before, we have to wait half a financial year for the budget to reach the level of project implementation. The provincial and local levels have not yet been able to put into practice the right to formulate and implement the financial policy in accordance with the expectations of the federal state structure given by the constitution. This calls for a separate debate.

Series of Rituals

Before presenting the budget of each year, the Ministry of Finance and various non-governmental organizations consult and give suggestions to the 'stakeholders' as an annual event. Professional umbrella organisations, the media and various other interest groups hold 'pre-budget' discussions and interactions. There is a lot of discussion about the problems of Nepal's economy and the shape of the upcoming budget. However, these discussions or suggestions have not helped at all to improve the budget system and allocation efficiency. There are many reasons behind this.

First, the bureaucracy of the government and the Ministry of Finance organizes such collection of suggestions only as an annual ritual. The mentality of the budget writing 'team' is that 'suggestions keep coming, no need to pay attention to them'. Ministers, secretaries, financial advisors who listen to these suggestions rarely give all the points to the budget division of the ministry.

Secondly, these suggestion gathering sessions are merely an opportunity to present demands for different sectors. The overall situation of the economy, the macro perspective of boosting the growth rate of the economy, and the insistence of trying to stick to their own words without considering the availability of resources is seen on the one hand, while on the other hand, the 'experts' who keep repeating irrelevant and common knowledge points as if this is the last opportunity to display their wisdom. Jamaat is also big. Strangely enough, three-quarters of the characters present in these suggestions or interactions that everyone organizes are repeating the same face.

Thirdly, the intention of those who organize such 'pre-budget' discussions is also motivated by the feeling that their organization's existence will be overshadowed if there is no program in this annual 'festival' rather than making a meaningful contribution to the new budget. The Ministry of Finance, on the other hand, completes the more formality of collecting suggestions by calling different groups or experts to avoid the fallacy of not making the budget after consultation with all stakeholders. In addition, there is a mainstream media that always puts economic issues as second priority, which is more interested in not missing the names of those who attend such events than giving more importance to realistic and serious opinions in the news.

Speakers at all these ritualistic events reiterate the problem of common knowledge that has existed for years—the trade deficit has become unsustainably wide. Industrial productivity is zero-oriented and the value addition of manufactured goods is extremely low. Exports have not increased at all. Foreign and domestic private investment is decreasing. Human resource development is minimal. The creation of employment opportunities in the country is zero. Manpower of active age has migrated from the country in the name of study or employment. The pace of capital flight is equally alarming. The credibility of government, non-government and private institutions of the country has been eroded and has reached its bottom. Corruption has engulfed the authority of the state. The proliferation of the shadow economy has engulfed the formal economy. Due to the decentralization of maladministration and corruption, even the federal system has not been able to improve public service delivery as expected.

Capital allocation is only 17-18 percent of the total budget. The actual expenditure from that allocation has been a total of 36 percent in the 10 months of this financial year. The experience of the past years and the provincial and local governments are not much different from this story. Public procurement is complicated and has been completely 'hijacked' by the collusion of power holders and contractors. The leakage of revenue is appalling. There is an all-pervading and readily visible nexus of politics, bureaucracy and the private sector. The situation where the revenue is not enough to cover the current expenses is becoming a permanent problem. There is a 'trend' of recovery of only 75 percent of the target during the financial year. Currently, the current account deficit has reached around two billion rupees. Public debt is gradually rising to exceed 50 percent of GDP.

It doesn't take any expertise or a major academic degree to come up with this list of information about what's happening in the economy or where the problems are. But in all these 'pre-budget' discussions, all the so-called intellectuals at the higher level spend time repeating the same list of problems. What are the specific solutions to those particular problems? It is rare to get down to the root of the problem and suggest practical solutions. Even if someone makes a really good suggestion, the government machinery does not have the interest or enthusiasm to include it in the budget. All these exercises become ridiculous when the same old budgets are repeated year after year and the basic problems of the economy remain the same. As a result, the annual average economic growth rate of the last two decades has been pegged at only four percent, and all the factors mentioned above have caused poor performance of the economy.

Government officials systematically sidestep the dire state of the fundamentals of the economy—productivity, job creation and entrepreneurship. In order to cover up the incompetence of the economic administration, the government inflation has dropped to 4.82 percent, remittances have increased by 19 percent in US dollars, the current account balance is in surplus of 3 trillion 27 billion, the foreign exchange reserves have reached 14 billion 140 billion dollars, and the interest rate has been accumulated in the banking system by 7 trillion rupees. Data is showing a decrease.

The rulers have decreed that they should be optimistic. These are certainly the strengths to realize the potential of economic growth. However, Nepal's economy has become a victim of the absence of a bridge to solve the problems that are becoming unlimited by utilizing or exploiting these limited capabilities. Building such a bridge is only possible with strong political will and serious structural transformation.

structural transformation A prerequisite for

structural transformation is its political ownership. Why structural transformation is inevitable, it is not possible to bring Nepal's economy back to the path of expected growth and development with only structural reform. Ownership of the political system adopted by the country, their belief that the country's economic progress and good governance will be achieved through this system (in the current context, the federal government system), and their behavior in accordance with that, and the good intention of protecting the country's interests by rising above the petty politics that only kill the position is necessary in the political leadership.

However, for several years, the country's political leadership (the government and all political forces outside the government) have been watching the imminent risks of the economy. A vivid example of this is, after the coming of the budget, there is no serious discussion about the real problems of the economy, their depth and solution within the political party, and the lack of institutional opinion about reforms. As the different proposals of the parties have to be debated inside and outside the parliament, their dimensions have shrunk to a hotel hall or a small meeting room of a ministry.

If the sick practice of making plans and budgets by ignoring the three aspects of declining revenue sources, increasing public debt and fiscal federalism cannot be addressed, the economic recession that has come to the surface as a sign will deepen in the coming year. Without new institutional sources of revenue and expanding the network of new taxpayers, there is no possibility of improving the already miserable tax collection situation. This will have a cyclical effect. The government will become more inefficient in capital expenditure. For that reason, reduced government consumption will distort investment and financial markets. Both infrastructural development and productivity are adversely affected. Wages and general consumption will decline.

After the decrease in revenue income, the only way the government has is to start raising more debt from internal and external sources to meet its expenses. The projection of the World Bank has estimated that Nepal's public debt will reach 70 percent of the gross domestic product in the next two years at this rate. There is a risk that the country will soon become like Pakistan or Argentina if the debt is increased only to exercise power without investing in any productive and job-creating sector. Because, the government does not seem to have a reliable, firm and sustainable plan to find new sources of revenue.

The country is in a federal state structure. Provincial and municipal governments are crucial and natural partners in operating the economy and as instruments of economic growth. An honest practice of fiscal federalism may be fruitful in solving many of today's problems, but the power of the centralized mindset has not fully absorbed it. This is the most worrisome bottleneck in structural reforms.

When the political equation changes in the federal government, let's set aside the constant feudal-slave relationship that appears in the state governments. The role of provincial and municipal governments has been deliberately divided into roles such as management of land and materials required for commercial agriculture, promotion of small and medium industries, usury control of microfinance and (non)cooperatives, supply network management and market search for products, local market monitoring and regulation. . The union rulers who claim to have vested rights are still sharing the dream of development with the people by showing them a blank piece of paper called the Periodic Plan prepared by the Central Planning Commission.

The long-term agenda of structural transformation is vast. A separate plan is needed to reduce the trade deficit, create jobs, completely improve the capital market, really build an investment environment, orientate the educational system to develop the ability to meet the labor market demand, and address the aversion of the youth towards the country. It is too late for the state to adopt a strategy that does not allow the digital economy, green economy, demographic advantage and geo-political rise to lose new possibilities and opportunities.

If the amendment of one letter or number of the budget presented by the government is passed by the House, then the budget is considered to be a 'failure' and the government is ousted on the basis of that. If there is no scope for any amendment in it, then the Parliament did not approve the budget on the same day it was presented? How long will the ritual of tying a cat continue?