Monday, June 4, 2018

Opportunities squandered

It was published in The Kathmandu Post, 04 June 2018. See this blog post as well for more.

The budget would have been a good expenditure and revenue plan under normal times. However, given the sizable electoral mandate, it falls short of introducing transformative reform measures

Finance Minister Dr Yuba Raj Khatiwada presented the first full federal budget and fiscal plan for 2018/19 (FY2019) to the parliament on May 29. It outlines a narrative that is consistent with policies and programs, and election manifesto of the communist party. Dr Khatiwada wants this budget to be seen as a solid base against which performance of the government should be evaluated in the coming years. However, considering a strong electoral mandate for this government and the opportunity to introduce transformative reforms and projects to change the course of the economy, public service delivery and budget-making, it is a disappointing fiscal plan.

Budget overview

Bound by the constitutionally mandated provision to share a portion of total revenue generated with subnational governments and the outsized fiscal budget of the previous year, the Finance Minister could not increase the size of budget as was expected by some of his party colleagues, especially in increasing direct cash-based social security allowances and local-level pet projects to cater to the core voter base. Hence, FY2019 expenditure outlay increased by just 2.8 percent compared to FY2018 budget estimate. However, the Rs1,315.2 billion expenditure plan is still 25.7 percent higher than the revised expenditure estimate for FY2018. Of this, 64.3 percent is allotted for recurrent spending (which includes fiscal transfer to subnational governments as well), 23.9 percent for capital spending and 11.8 percent for financial provision. The budget amounts to about 38.7 percent of the gross domestic product (GDP).

The government is planning to meet 63 percent of total expenditure by mobilising domestic revenue, 13 percent from domestic borrowing and the remaining 24 percent from foreign grants and loans. Overall, the total revenue target is Rs945.6 billion— including Rs114.2 billion revenue sharing with subnational governments—which is about 30 percent increase over the FY2018 revised estimate. The government has to share, based on monthly collections, 30 percent of VAT and internal excise duty, and 50 percent of royalties from natural resources with subnational governments.This amounts to an estimated 12 percent of projected total revenue in FY2019.

In addition to direct revenue sharing, almost three-fifth of the recurrent budget (or 47.7 percent of the total budget) is set aside for subnational governments in the form of fiscal equalisation, conditional and unconditional grants (no matching and special grants for now). The total fiscal equalisation and conditional grant for provincial and local governments is Rs113.4 billion and Rs195.1 billion, respectively.These are substantial revenue sharing and fiscal transfers, which the subnational governments will incorporate in their budgets before the start of FY2019 (ie, mid-July 2018).

Mixed picture

In terms of macroeconomics and policy direction, the budget gives a mixed picture. Overall, Dr Khatiwada has presented a manageable budget compared to its size and growth in the previous years. However, his budget has fallen short of notably departing from the past and setting a new trend in terms of budget-making, outlining priorities given the available resources and capacities for budget execution, and introducing transformative reform measures and projects.

First, the government has given continuity to most of the projects and programs of the past. It prioritises control of revenue leakages, agricultural development, tourism, and infrastructure development, especially pushing forward with preparatory work for large-scale projects, development of sports facilities, hospitals and industrial estates. It provides tax relief by doing away with educational and health services taxes and value added tax in the case of private hospitals (which should ideally lower health and educational costs); tax concession for project reinvestment in tourism and productive sectors; reduction of income tax by 50 percent on tea, clothing and dairy production; and seven year income tax holiday for woman-run businesses, among others.

Second, the finance minister has tried to observe fiscal discipline by resisting the temptation, or pressure, to introduce a bloated budget without ascertaining revenue sources. He has tried to rationalise spending by not increasing salary and allowances, which already constitutes about 15 percent of total recurrent spending, and direct cash-based social security spending. However, like previous finance ministers, he has given continuity to pet projects of populist nature: continuing the federal constituency development fund under a different name and governance structure but increasing its budget to Rs40 million (making lawmakers project managers as well), spreading subsidies and grants too thin across too many sectors and programs, and open-ended loan waiver for small farmers and loan provisions based on educational certificates, among others.The failure to notably depart from this nature of budget-making and setting of priorities (usually prone to spending inefficiencies) is an example of opportunities squandered by a finance minister from a party with such a strong electoral mandate.

Third, a major disappointment is the lack of a credible reform plan to reinvigorate the private sector so that industrial production rises above the peak reached around 1997. The business community is disappointed by the singular focus on raising revenue as opposed to robust economic planning and accelerating industrial activities by rolling out time-bound reform plans in key strategic sectors. The finance minister does not have a good rapport with the private sector—at times for good because he is against inefficient private operations but at times bad because of his communism-inclined ideology that sees private sector as revenue leakers and rent-seekers only. Furthermore, the budget lacks a viable implementation plan, which raises suspicion over its timely execution (note that the government expects just 70 percent of planned capital budget to be actually spent in FY2018).

Fourth, if the government fails to meet the revenue target in addition to securing projected foreign grants and loans, then there is a likelihood of deterioration of fiscal and overall macroeconomic balance. Revenue growth target of over 30 percent is too ambitious when considering business-as-usual revenue administration operations and marginal tinkering of import tariff on some non-essential items. The fact that GDP growth of 8 percent itself is overly ambitious and the private sector find themselves less enthused than they were before the budget was unveiled means that it will be very challenging to meet the revenue target. Additionally, fiscal deficit is estimated to be about 7 percent of the GDP in FY2018 and is projected to be around 10 percent of the GDP in FY2019, which means that the government will heavily borrow internally (net internal borrowing is about 4 percent of GDP already), exacerbating interest rate volatility, inflationary pressures, current account deficit, outstanding public debt and crowding out of the private sector. Net foreign borrowing is projected to jump over 6 percent of the GDP (up from about 1.5 percent of the GDP in FY2018), which again is difficult to achieve with current trend of budget execution. Note that our interest payment to service debt is already excessively high (1 percent of the GDP).
In a nutshell, the budget is a good expenditure and revenue plan under normal times. 

However, given the sizable electoral mandate and strong backing for the prime minster, this budget is more a case of squandered opportunities than setting a base year for evaluation in the coming years.

बजेटका सात महत्वपूर्ण पाटा

सेतोपाटीको प्रकाशित लेख, ३० मे २०१८।  टुईटर  थ्रेड  यहाँ   

अर्थमन्त्री युवराज खतिवडाले आर्थिक वर्ष २०७५/७६ का लागि १३ खर्ब १५ अर्ब रुपैयाँको वार्षिक बजेट मंगलबार संघीय संसदमा प्रस्तुत गरेका छन्।

यो लेखमा बजेटका सात महत्वपूर्ण पक्षबारे चर्चा गरिएको छ।

पहिलो, अर्थमन्त्रीले बजेटको आकार विगतमा जस्तो अवास्तविक ढंगले बढाएका छैनन्। आकार नबढाएर खर्च व्यवस्थित गर्न खोज्नुमा दुई कारण छन्। राजस्व संकलनको निश्चित हिस्सा प्रान्तीय तथा स्थानीय सरकारलाई बाँड्नुपर्नेछ र अघिल्ला सरकारले ल्याएको ठूलो बजेटले यो सरकारको हात बाँधेको छ। तर, विगतका अर्थमन्त्रीले जस्तै खतिवडाले चालु खर्च संघीय राजश्वभन्दा बढी राखेका छन्।

दोस्रो, विनियोजित रकम खर्चको विश्वसनीय र समयबद्ध कार्यान्वयन योजना बजेटमा छैन। यसले विनियोजित रकम सदुपयोग हुनेमा शंका उत्पन्न गराएको छ।

अघिल्लो सरकारले समयमै बजेट कार्यान्वयन हुने बाचा गरेको थियो। व्यवहारमा त्यस्तो भएन। आर्थिक वर्ष सकिँदासम्म विनियोजित रकमको झन्डै ७० प्रतिशत मात्र खर्च हुने अपेक्षा छ।

विनियोजित बजेट खर्च हुन नसक्नुमा आयोजना तयारी तथा कार्यान्वयनको संरचनात्मक कमजोरी, आयोजना व्यवस्थापन तथा ठेकेदारको कमजोर क्षमता, प्रान्तीय तथा स्थानीय तहमा आयोजना कार्यान्वयन गर्न सक्ने जिम्मेदार व्यक्तिको अभाव र योजना तथा सञ्चालन तहमा राजनीतिक हस्तक्षेपलगायत कारण छन्। बजेट कार्यान्वयनमा देखिएका

यी समस्यालाई अर्थमन्त्री खतिवडाले खासै सम्बोधन गरेका छैनन्। यसले विनियोजित रकम समयमै खर्च हुन्छ भन्नेमा शंका छ।

प्रधानमन्त्री नेतृत्वको परियोजना कार्यान्वयन समिति यसमा नयाँ अवधारणा होइन। राष्ट्रिय योजना आयोग र लगानी बोर्डको अध्यक्षका रूपमा प्रधानमन्त्रीले अहिले पनि यो भूमिका निर्वाह गर्दै आएका छन्।

त्यस्तै, आयोजना सचिव तथा निर्देशकहरूको सशक्तीकरण र खरिद ऐन संशोधनले मात्र बजेट कार्यान्वनका अवरोध हल गर्न सक्दैनन्। यी नयाँ अवधारणा होइनन्।

तेस्रो, अर्थमन्त्रीले निर्माणाधीन आयोजनाहरूका लागि पर्याप्त बजेट विनियोजन गर्ने प्रतिबद्धता गर्नुका साथै सरकारका केही पूर्वघोषित पूर्वाधार आयोजना (रेल्वे, वाटरवे, रोपवे आदि) को तयारीका लागि प्रारम्भिक रकम विनियोजन गरेका छन्। यति हुँदाहुँदै यथार्थमा कुल ग्राहस्थ्य उत्पादन (जिडिपी) को अनुपातका आधारमा पूँजीगत खर्चमा बजेट विनियोजन घट्दो छ।

अघिल्ला दुई अर्थमन्त्रीले पूँजीगत खर्चका लागि जिडिपीको ११ प्रतिशतभन्दा बढी बजेट विनियोजन गरेका थिए। वास्तविक खर्च भने जिडिपीको करिब ७.९ प्रतिशत थियो। यस वर्ष विनियोजन जिडिपीको ९.२ प्रतिशत मात्र छ।

सरकारले अहिलेको पूर्वाधार अभाव पूरा गर्न सार्वजनिक पूर्वाधारमा मात्र कम्तिमा जिडिपीको ८ देखि १२ प्रतिशत खर्च गर्नुपर्नेछ।

चौथो, नयाँ आयकर सीमाले कम आम्दानी गर्नेलाई कम कर (१५ प्रतिशतको सट्टा १०) र बढी आम्दानी गर्नेलाई बढी करको नीति सुनिश्चित गरेको छ। यो प्रगतिशील कर संरचना हो। तथापि, यो नीतिको मुख्य समस्या भने, हामीकहाँ १० लाख जना मात्र भ्याट र आयकरमा दर्ता छन्।

पाँचौं, राजस्व वृद्धिको अनुमान अति महत्वाकांक्षी छ। अर्थमन्त्रीले २९.८ प्रतिशतको राजस्व वृद्धिदर हासिल गर्ने लक्ष्य लिएका छन्। यो भनेको चालू वर्षको संशोधित अनुमानभन्दा बढी हो। पछिल्लो नौ वर्षदेखि यो वा योभन्दा बढी दरमा राजस्व बढेको छैन। बाबुराम भट्टराई अर्थमन्त्री हुँदा मात्र राजस्व उच्च दरमा बढेको थियो। त्यतिबेला बैंक कर्जा खुकुलो हुनु र रेमिटेन्स आम्दानी बढ्नुले आयात उच्च थियो। यसले राजस्व असुलीमा सकारात्मक प्रभाव पार्‍यो।

यसपालि स्थिति फरक छ। राजस्व असुली बढाउन नयाँ स्रोत फेला पर्ने गरी अर्थतन्त्र विस्तार भएको छैन। यसको निम्ति बढीभन्दा बढी व्यवसायीलाई करको दायरामा ल्याउनुपर्नेछ। राजस्व असुली बढाउन सबभन्दा कठिन यही हो, जुन प्रत्येक अर्थमन्त्रीले आफ्नो कार्यकालमा प्रयास गर्छन्।

छैठौं, ८ प्रतिशत आर्थिक वृद्धिको अर्थ आर्थिक गतिविधिमा विस्तार र राजस्व परिचालनमा वृद्धि हो।

यो वास्तविक भने छैन, किनभने जिडिपी वृद्धिको लक्ष्य नै अवास्तविक छ। चालू वर्ष निर्वाचनसँग सम्बन्धित खर्च र निर्माण कार्यमा वृद्धि भएका बेला पनि अर्थतन्त्र ५.९ प्रतिशत बढ्ने अनुमान गरिएको छ। अर्को वर्ष मनसुन अनुकूल छ। यसले कृषि उत्पादनमा सकारात्मक प्रभाव पार्ला, तर चुनावको बेलाजस्तो थप सरकारी खर्च हुने छैन। बजेटले निजी क्षेत्रलाई लगानी गर्न प्रोत्साहित गर्ने गरी नयाँ योजनाहरू पनि ल्याएको छैन, जुन विगतका अर्थमन्त्रीले गर्थे। यसले सार्वजनिक पूँजीगत खर्च अहिलेकै अनुपातमा रहने देखिन्छ।

यति मात्र होइन, विप्रेषण (रेमिटेन्स)  आम्दानी घट्दो छ, जसले आयातमा आधारित राजस्व र उपभोक्ताको माग दुबैमा असर पार्नेछ। त्यसैले, अनुकूल मनसुन, भुइँचालोपछिको पुनर्निर्माणमा निरन्तरता, विद्युत आपूर्ति र उत्पादनशील गतिविधिमा सुधार र स्थानीय तहमा हुने खर्चका बाबजुद् आर्थिक वृद्धिदर ५.५ प्रतिशतदेखि ६.५ प्रतिशत हाराहारी रहने देखिन्छ।

सातौं, वित्तीय घाटा बढ्दै जानुले देशको समष्टिगत आर्थिक सन्तुलन खल्बल्याउन सक्छ। चालू वर्ष वित्तीय घाटा जिडिपीको ७ प्रतिशत रहने अनुमान थियो भने अर्को वर्षको अनुमान १० प्रतिशत छ।

पछिल्ला केही वर्षमा सरकारले यति ठूलो परिमाणमा ऋण लिएको छ, जसको ब्याज नै जिडिपीको झन्डै १ प्रतिशत पुगेको छ। यसमा आन्तरिक ऋणको हिस्सा करिब ८४ प्रतिशत छ। खुद आन्तरिक ऋण अघिल्लो वर्षको तुलनामा जिडिपीको २ प्रतिशत बढेर ४ प्रतिशत पुगेको छ।

यसको अर्थ, सरकारले बैंकिङ क्षेत्रबाट ठूलो परिमाणमा ऋण उठाइरहेको छ, जसले तरलता अभाव बढाउनुका साथै ब्याजदरमा अस्थिरता ल्याएको छ। सरकारले आन्तरिक ऋण जति उठाउन सक्छ, लगभग त्यो सीमा बराबरको रकम उठाइसकेको छ।

त्यसैले, खुद वैदेशिक ऋणमा ठूलो वृद्धि हुने अनुमान छ। यो चालू वर्ष जिडिपीको १.५ प्रतिशत थियो भने अर्को वर्ष ६.८ प्रतिशत पुग्न सक्छ। यो पनि वास्तविक होइन, किनभने वैदेशिक ऋणको अधिकतम हिस्सा (खासगरी दुई ठूला बहुपक्षीय विकास बैंकबाट प्राप्त हुने रकम) सरकारी खर्चमा निर्भर छ। यसको निम्ति सरकारले पनि पूँजीगत खर्च बढाउनु पर्नेछ।