Monday, April 11, 2011

Indecisive Finance Minister Bharat Mohan Adhikari

My latest op-ed is about the discussion surrounding budget (supplementary or/and full budget) in Nepal. The finance Minister is indecisive on the timing and nature of the budget itself. As with most of the former finance minsters, there isn’t anything remarkable in his tenure so far. But, he has done worse by creating confusion over budget, triggering the resignation of finance secretary, wavering on tax evasion scandal, and not taking into confidence the officials of his own ministry. Read the full article for more discussion. By the way, no op-ed pieces for the next two months.! :)

Indecisive Finance Minister

Barely three months are due for the next fiscal year to start, but Deputy Prime Minister and Finance Minister Bharat Mohan Adhikari is still undecided about the possibility of supplementary budget. On April 3, during the Public Account Committee hearing, responding to lawmakers’ question about the budget muddle, he argued that the decision to quash or bring a supplementary budget was uncertain as of then, but a full-fledged budget for the next fiscal year would be prepared by May 3. While the officials at the Ministry of Finance (MoF) are perplexed at Adhikari’s arbitrary decisions and indecisions at the same time, Finance Secretary Rameshore Prasad Khanal resigned due to differences over supplementary budget, tax evasion scandal, and transfer of officials in the ministry.

As a citizen concerned about the future of the nation, one should ask why and for what purpose do we need supplementary budget. Or are there alternatives at this point in time? Adhikari argues that the coalition is looking for “alternatives to supplementary budget to deal with the new economic challenges.” Given our macroeconomic fundamentals, the progress of the already announced budget by former Finance Minister Surendra Pandey, and the state of development expenditures, let us be assured that no new economic challenges have emerged since the last fiscal year. In fact, we are in the same economic mess that we have been in since 2008. It is very likely that Adhikari is looking for alternatives not to address the economic woes, but, is bowing to pressures, to allow UCPN (Maoist) to freely dole out taxpayers’ money to their disgruntled political base.

Therefore, rather than procrastinating on the nature or existence of supplementary budget, Adhikari should have the guts to openly pronounce that even a discussion about supplementary budget is a distraction from addressing the major macroeconomic challenges faced by the economy. Period.

So far, Adhikari has failed to be a competent finance minister. He is chiefly responsible for creating an unnecessary situation where an honest civil servant like Khanal had to resign, reducing morale of the rest of the few competent and honest civil servants. To retain trust, if any remains in him, from civil servants and donor community, Adhiarki should not fail again by succumbing to the UCPN (Maoist)’s party-centered pressure to bring out a distributive supplementary budget in one form or the other. It does no good to the country, but to the few political cadres and parties.

The confusion surrounding supplementary budget has bewildered and diverted focus of MoF officials who are just preparing to review the performance of this fiscal year’s budget and to iron out budgetary allocations for next year. The officials who are responsible for preparing budgetary allocation based on priorities set by National Planning Commission and ruling parties are unaware of the deliberations on supplementary budget taking place at residences of political leaders. This is nothing less than trying to willfully play with tax payers’ money and state coffers. The value addition of such an expenditure plan is negative because only few will reap direct or indirect benefits from this.

Media reports indicate that left leaning political economists and analysts are preparing the expenditure and revenue plan without knowledge of concerned government officials. This comes out of desperation to show party cadres that something is being done by their leaders in power. Worse, the Maoist party duped its followers with grandiose promises that are next to impossible to fulfill in reality. The latest move might be an avenue to placate disgruntled political base, who are increasingly getting frustrated with the way party leaders like Pushpa Kamal Dahal have been hoodwinking them by promising them bounty that country’s economy cannot afford. What could be better way of silencing mounting grudges than by doling out money to political cadres at the cost of development and welfare of poor people!

Let us be very clear about the consequences of supplementary budget or its alternatives, which reports indicate are largely distributive in nature. It means Adhikari and coalition government are planning to allocate money to favorable “model” districts, VDCs and political organizations and cadres under various disguises such as priority development projects, self employment schemes, and social security/welfare. This will keep their political base happy for the time being, but will drain state resources and donors’ money. Worse still, internal and external loans to finance their political agendas will have to be burdened by future generations as per capita debt mounts on top of the already high rate.

Honestly, if Adhikari is concerned about the existing state of our economy and welfare of citizens of which approximately 78 percent live below $2 dollar a day, then he should unconditionally take responsibility for the fiasco at MoF, openly come out against supplementary budget or its alternatives, speed up tax evasion investigation by giving every tooth it needs, and aggressively work to bring out sustainable policies that will address the major macroeconomic challenges of our economy. Letting down the morale of a few honest civil servants amidst hundreds of dishonest ones sends a wrong message to the ones who are thinking of being honest and those that are aspiring to join civil service for the sake of this country.

Meanwhile, while preparing budget that will draw in expenditures from the tax payers’ pocket, all the established procedures (which definitely do not include preparing budget at political leaders’ residences without the knowledge of MoF officials) should be fulfilled. Adhikari has failed to do it and to stand by the very civil servants he is supposed to work with.

Our problems are clear, but positions of our political parties to address them are not. We are facing balance of payments crisis, ballooning trade deficit, high and sticky prices, impending financial disaster, eroding competitiveness of our products, declining exports, ailing industrial and manufacturing sectors, frequent labor disputes, industrial insecurity, stagnation in job creation and economic growth, acute power crisis, and lack of adequate infrastructures.

On top of this about 3.7 million people are at risk of food insecurity, and people are reeling under high fuel and food prices. Any new policies that will increase consumption expenditures (instead of investment spending) will further fuel prices, which will affect the poorest lot the most. Tackling these problems requires a fundamental shift in the way we allocate budget and prioritize sectors and projects.

Rather than addressing these problems, a budget designed to dole out money to party cadres and to favor political bases will further exacerbate them. Neither supplementary budget nor alternatives to it will address them in a matter of just three months. Adhikari most probably knows it pretty well, but is too feeble to not succumb to the UCPN (M)’s pressure. He should acknowledge that his indecisiveness and feebleness should not put taxpayers’ money at risk and drain state’s coffers to fulfill selfish political agendas.

[Published in Republica, April 10, 2011, p.6]