Budget implementation rate falling for lack of capacity of government agencies




२०७५ जेठ ३१ बिहीवार
Bishnu Phadera

The government has set a target to achieve the developing country status by 2022. But before that, Nepal has to attain the Sustainable Development Goals (SDGs) by 2030. Nepal hasn’t reached the highway to achieving SDGs, rather wandering in alleyways; Policymakers need to come out of their comfort zones to achieve these goals. Big projects should be completed within the stipulated time and affordable budget to do well in the development indicators.

The government needs to reform the banking sector. The government should concentrate more on the implementation of the budget for the next fiscal year (FY) instead of just placing it in parliament. The rate of budget implementation has been falling over the last six years mainly due to lack of capacity of government agencies. If the government doesn’t take steps to build capacity of these agencies, full implementation of the proposed budget for FY 2018-19 will not be possible The budget deficit is a matter of concern, as the deficit would be met through borrowing from banks and selling savings certificates. The target of domestic borrowing has such high amount set. Such high amount of domestic borrowing is likely to limit the availability of funds for private investment.

A sluggish growth was also observed in the implementation of annual development program (ADP), As the development work usually gets momentum in the last three months of a fiscal year, its quality declines, the allocation for education, health and technology is fundamental of development, but only nominal amount is allocated in proposed budget. The expansion of income tax net is crucial for it,

Corporate tax rate should be reduced for all sectors to encourage private sector investment. Besides, corporate tax cut for the banking and insurance sectors are minimal and it will not bring notable advantage to the people. There are many proposals of foreign investments and loans at lower interest rate in the pipeline, but the government can’t manage the investment due to lack of capacity. Instead, the government has been taking out loans at 5-6 per cent interest rate from the private sector to meet the budget deficit. However the outline of a universal pension scheme in the next budget is really admirable, as it would provide safeguard to general people. It is very important to remove discrimination in society to achieve the SDGs economic development of nation.

(Anup Paudel ,PhD Scholar, Financial development and economic growth in Nepal.)