This is budget time. As the nation gears up for the annual financial ritual, the debate among major parties on whether there should a partial or full-fledged budget has gained in intensity. Opposition parties have teamed up for a partial budget, as a caretaker government, in their view, has no legal right to institute fiscal policy measures that might have long-term implications for the national economy. Hence, they have been arguing that a partial budget brought on the back of all-party consensus is the only solution to avert a financial turmoil. However, ruling parties have refused to buy such arguments and stressed that a full-fledged budget is essential to ensure continuation of development activities and to kick-start new projects. Finance Minister Barsha Man Pun has repeatedly said that a partial budget with limited resources will not only obstruct implementation of ongoing development works but also make launch of new infrastructure projects impossible.
Undoubtedly, the opposition parties have a point in that an election government shouldn’t be allowed to bring crucial policy measures that can be used to influence voters. Nonetheless, we believe a partial budget that authorizes government to disburse one-third of current fiscal year expenditure is no way out as well. First, a partial budget will be a disaster for the development activities that will be executed in the upcoming fiscal year because with one-third appropriation, neither can government agencies call for fresh construction tenders for the whole year nor will it have a mechanism to award tenders for one-third of work for planned development activities. Moreover, a partial budget will worsen our already weak expenditure capacity, which has been a major barrier to Nepal’s development efforts. As most of us know Nepal is underdeveloped not only because of lack of recourses but also because of lack of the capacity to utilize available resources. As a result, around one-third of the earmarked development expenditure is frozen at the end of each fiscal year and repeated efforts to boost development spending that creates job opportunities and boosts consumption have brought no good results.
Second, a partial budget will create confusion on Nepal’s policy consistency, which is a crucial factor for luring foreign investors who are planning long-term investments in sectors like hydropower. Thus, it will not only erode confidence of those investors who are exploring investment opportunities in Nepal but also of those planning to expand their existing capacity. Lack of additional investment will in turn worsen unemployment, which is already at an alarming level. Third, a partial budget will fail in extracting commitment for crucial economic reforms the country desperately needs to deal with various bottlenecks in accelerating development. A strong commitment to economic reforms that creates more space for private sector and strengthens government supervision is vital to ensure continued support of donor agencies which finance around 40 percent of development expenditure.
For all these reasons we believe bringing a full-fledged budget with consensus of all major parties is the best answer to end the current political impasse. But, regrettably, the ruling parties have not made sincere efforts to gain the confidence of major parties that are now against a full-fledge budget. We urge the government to initiate meaningful dialogues with major parties out of government, address their grievances and create a conducive environment for a consensus full-fledged budget