Rs 819b budget unveiled

Rs 819b budget unveiled

With huge funds for reconstruction and infra development, Finance Minister targets 6pc growth

14 July 2015 | The Kathmandu Post

Prithvi Man Shrestha

KATHMANDU, JUL 14 - Finance Minister Ram Sharan Mahat presented a Rs819 billion budget for the next fiscal year on Tuesday with focus on reconstruction, rehabilitation, infrastructure development and balanced regional development.Given the massive damage caused by the earthquake, reconstruction has been the main focus of the budget with an allocation of Rs91 billion. Of the total amount, the government will mobilise Rs74 billion from the National Reconstruction Fund which has been set up under the National Reconstruction Authority. Before the authority starts its work, an additional Rs17 billion will be spent through the existing government mechanism. A separate Heritage Fund for rebuilding the damaged heritage sites has been proposed, besides the Economic Revival Fund under Nepal Rastra Bank that will refinance the rehabilitation of the earthquake-displaced people. The budget, however, lacks a concrete reconstruction plan.

With huge resources allocated for reconstruction and infrastructure development, Finance Minister Mahat has targeted a 6 percent economic growth next fiscal. In a departure from the past, the government has allocated funds in order to maintain regional balance with focus on Madhes, Moutain-Hills and remote areas, and Karnali and far-western regions. “For decades, the budget had not been presented with a view to maintaining regional balance. This is something new,” said Jagadish Chandra Pokharel, former vice-chairman of the National Planning Commission. Many Tarai-based projects and programmes have got huge funds this year. For instance, the Postal Roads got Rs3.19 billion.

For the hill and mountain regions, Mid-Hills Highway, all weather motarable roads connecting district headquarters, the Great Himalayan Trail and hydropower have got priority. The government has plans to develop 10 modern towns along the Mid-Hills Highway. Former finance secretary Rameshore Khanal said the budget prioritises urbanisation in the hills, which is crucial to boosting growth in the areas. One of the most backward areas of the country, the Karnali region has got focused budgetary programmes including continuation of the Karnali Employment Programme, development roads, Special Economic Zone in Jumla and tourism infrastructure development. Unified urban infrastructure development programme in Dhangadi, Attariya, Bhim Dutta and Jhalari municipalities of the Far West have also been announced.

The budget also seems to be private sector friendly. The VAT threshold has been increased to Rs5 million from the current Rs2 million and it refrained from imposing additional tax even when huge resources are required for reconstruction. “The VAT threshold revision could promote informal economy and the government could also lose some income tax,” said Khanal. Pashupati Murarka, president of the Federation of Nepalese Chambers of Commerce and Industry, said the budget did not hike taxes, as suggested by the private sector. The High-level Tax System Review Commission had advised reconstruction tax to raise funds for rebuilding.

In an effort to promote mass transport, the budget bars vehicles smaller than 40-seaters on the main roads of Kathmandu Valley. It also bans registration of such vehicles now on. As the country will be federated after constitution promulgation, the government has allocated funds for preparing detailed project reports for provincial roads. Incentives have been offered for the merger of Village Development Committees. However, some experts said the government should have waited until the federal set-up. The finance minister announced to develop Kathmandu Valley as the national Capital after the country goes federal. The budget also initiates the process to build three smart cities--one in Kathmandu Valley, one in Lumbini and the third in Nijgadh. Mahat did introduce some populist and distributive programmes by increasing the monthly allowance for elderly people and increasing the budget for Constituency Development Programme and Parliamentarian Development Fund.

Another important announcement is celebrating the next fiscal as the Budget Implementation Year at a time when the government is struggling to spend the development budget. To ensure better project implementation, Mahat announced that the project chief having performance indicators above 80 percent will not be removed for the entire project period. Experts still doubt the government’s ability to spend the “gigantic” budget. At a time when the government has been struggling to spend Rs600 billion a year, said Khanal, spending resources over Rs800 billion without increased recurrent expenditures is an uphill task.

the provisions

Three funds for reconstruction—National Reconstruction Fund, Heritage Fund and Economic Revival Fund

Carpentry, plumbing and other skill training for 50,000 to employ youths in reconstruction

Foreigners to be allowed to buy apartments

Government agencies required to procure Nepali goods even if they are expensive by 15pc

One bank account for one family

 Infrastructure Development Bank to be established to finance infrastructure

No hike in civil servants’ salaries

Age-bar of employees to be reviewed in light of growing life expectancy

50 percent discount on revenue of electronic media. Renewal fee waived off

Hand-written passports to be replaced by Machine Readable Passports within next fiscal

Skill training programmes for self-employment of marginalised communities

Teaching Math, Science and English through broadband service to be piloted in 100 remote schools

Old age allowance increased to Rs1,000 per month

Jilung on China-Nepal border to be developed as an alternative trade port

Rs6.1 bn for subsidy on fertilisers and seeds

Rs74 billion for reconstruction of earthquake-damaged infrastructure—Rs50 billion for house reconstruction

400 public toilets to be constructed in Kathmandu Valley

Next fiscal declared Budget Implementation Year 

VAT threshold increased to Rs5 million