Are we moving in the same circle? Yes but with some changes in the actors involved. The story goes like this.
On Feb 2, 2006, during the regime of former King Gyanendra, we, at the Institute for Development Studies, organized a press conference to release a report, “The Economy and the State: Can it Survive?” prepared by a team under my guidance. The report was widely reported by the media both here and abroad the next day but the government was very critical of it. The authorities, in fact, organized a press conference participated by Minister of State for Finance, Minister of Information and governor, Nepal Rastra Bank, on Feb 4 where they tried to criticize the report even warning the people not to believe its findings. We, however, remained firm on our findings and the government comments were not taken seriously by the media and the general public. On the contrary, it helped to make our report the talk of the town.
Let us approve the budget first. The political parties can then involve themselves in deals, negotiations and even bandas. We all know, as Nietzsche claims, madness is something rare in individuals but in groups, parties and people, it is the rule.
Allow me to quote one finding of the report that was widely reported and discussed. “A detailed integrated analysis of the overall trend of government revenue and expenditure until recently, the current economic situation, the expected negative impact of the supplementary budget on government revenue and the new structure of custom duties show an alarming situation: The Government will be financially bankrupt by the end of May/ June.” The Jana Andolan II, however, started from April 6, 2006 and we all know what happened after that.
Now, almost three years after the publication of our report, the coalition government of 22 parties under the leadership of CPN-UML is almost bankrupt but in a different way: The government has resources but it cannot spend it because its budget has not yet been approved by the parliament. The public is paying taxes but the resources mobilized by the government are just lying idle in the central bank. Can we afford such a situation? The economic situation is similar to what it was in Gyanendra’s regime. Let me again present a few lines from the old report:
The growth in the per capita income will be negative or barely positive.
The inflation rate due to domestic conflict will increase at its own pace … but price of selected goods may exceed the maximum limit and occasional non-availability of such goods will be a normal feature.
National consumption will increase at a faster rate than the growth in income, which will further widen trade deficit due to import of consumption goods. This process will lead to further deterioration in the balance of payments position with India. It will not be possible to maintain exchange rate with Indian currency without the assistance of India.
Once the economic problem explodes – it may in the near future – it won’t come as a surprise if total anarchy prevails in the country, at least in selected urban areas. Then, neither the government nor the political parties will be able to relax and remain unconcerned like now.
It appears that the forecast that we made for Gyanendra’s regime is coming true after three years after we have conducted the constituent assembly elections successfully and the country has been declared secular and republic. Who do we have to blame? The citizens at large, the politicians or the leaders of the three major political parties who are meeting regularly for one reason or another to establish peace in the country? Unfortunately, it is just like a movie, and this movie is not going to end differently because we keep playing the same reel.
We must remember that we cannot fool all of the people all of the time. Let us be clear what we want and what the final outcome will be. To reuse the observation made by Thomas Friedman of the The New York Times in a different context, let all these leaders stand in front of the people and tell them the truth – My fellow citizens: Nothing is happening; nothing is going to happen. It’s just you and me and the problem you own.
The problem of budget is more serious than what we have imagined. The government has resources but cannot use it. No one wants his country to be bankrupt in King Midas fashion. It will give a bad image of the country for a long time to come and will seriously affect foreign investment and growth of the economy as no one wants to put his hard-earned money in a country, which cannot even approve the budget on time.
Though detailed information is unavailable, domestic investment is also declining and capital is slowly moving out of the country. As a result, the share price of most of the institutions is declining fast as there are too many sellers and too few buyers. Interest rate in the banking sector has gone up as there is a liquidity problem of a massive scale in the country. The reason is simple: The government is collecting taxes but is not using it creating a problem of what is popularly known as problem of “crowding out”. The growth of domestic production of goods and services, popularly known as gross domestic product or GDP, in the current year will be barely positive or even negative, given the current trend. The domestic price, if the current experiences are any guide, will continue to increase, especially of pulses, rice and vegetables. People are migrating abroad at a rapid pace but the government and the major political parties have remained unconcerned about the economic situation, its direction and the general welfare of the people.
Let us approve the budget first. The political parties can then involve themselves in deals, negotiations and even bandas. We all know, as Nietzsche claims, madness is something rare in individuals but in groups, parties and people, it is the rule.
(Writer is associated with the Institute for Development Studies.
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Sad, proven, thoughtful and true analysis. I´m not surprised though - after nearly two decades of complete anarchy you may call politics, I expected this to happen sooner. Your focus is this budget, which is important and urgent, but the problem won´t go away after approval of the budget.
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