Next year's budget size can go up to Rs. 1570 billion

Kathmandu, Dec. 19:

Finance Secretary Shankar Adhikari on Tuesday said that the size of the budget of the next fiscal year 2018/19 could go up to Rs. 1570 billion.

Although the country needs huge resources to manage federalism for a year or two as there is a need to develop infrastructure for the provinces as well as the local bodies, there is no dearth of resources to implement federalism, he said while speaking at an interaction on ‘Fiscal challenges under federalism’.

He pointed at the possibility of revenue growth by 30 per cent next year. The size of the revenue this year is Rs. 730 billion, and 30 per cent growth means about Rs. 950 billion revenue collection.

“Similarly, foreign grants could be increased to Rs. 100 billion, which is Rs. 72 billion this fiscal, and foreign loans could fetch Rs. 300 billion in the next fiscal year from Rs. 214 billion this year. Principal payment will be Rs. 20 billion, and cash reserve from the current fiscal year will be about Rs. 20 billion,” he said.

He also maintained that federalism would not be burdensome for the country as the administrative cost was likely to go down as the number of spending units would go down.

Adhikari said that the cost centres would be reduced to 2,000 from 3,500.

However, he said that the country needed to attract huge amounts of Foreign Direct Investment (FDI) in order to meet the resource gap in the country, and the country must apply a ‘need-based approach’ while selecting a project and allocating budget to it at the sub-national levels.

“It’s true that fiscal responsibility and liability of the government are going to increase in the federal system. Though it’s challenging, it’s not impossible,” said Adhikari.

“With a stable government in place, we will have a climate conducive to investment. This will boost the revenue buoyancy,” he added.

However, former finance secretary Dr. Shanta Raj Subedi said that with the implementation of federalism, the budget volume of the central government would also increase, and the federal as well as the sub-national governments might face resource crunch.

According to him, while the central government has to share its revenue, including the Value Added Tax (VAT) and excise duty, with the provincial and local governments, it will also have to transfer various grants to them.

“Provinces are going to face a resource crunch for at least two or three years, and the central government should bear the liabilities while we cannot reduce the amount of grants that we have transferred to the local units,” said Subedi.

He also suggested broadening of tax net, curbing revenue leakages and increasing the tax compliance to address the resource crunch.

Former vice-chairman of the National Planning Commission and former governor of Nepal Rastra Bank Dr. Yuba Raj Khatiwada said that there was a challenge to create institutional mechanisms for federalism within a year.

“Both revenue and liability should be gradually assigned to the sub-national governments. We have a lot of fiscal space. We can utilise it toward propelling economic growth,” he said.

According to Dr. Khatiwada, about 20 per cent of the Gross Domestic Product (GDP) must be invested in infrastructure development, and if the private sector shares the cost, the government should put in a minimum 10 per cent.  

Kantika Sejuwal, the Mayor of Chandannath Municipality in Jumla, lamented that the central government had discriminated Jumla in fiscal transfer.

“Budget allocation is uneven and the fiscal transfer made to our municipality was very low,” she said, vowing to utilise local resources and reducing the dependency on the central government for fiscal grants.

She also complained that the bureaucracy was not cooperating with the newly-elected representatives.

“With the aim of attracting investment in Jumla, we are organising an investment summit in Chandannath Municipality,” she informed.

Former vice-chiarman of the NPC Dr. Shankar Sharma suggested reducing the number of priority one projects, and applying better project preparedness before allocating budget to them.

He said that the local bodies should be motivated to find sources of revenue and generate their own resources.

The programme was organised by the Society of Economic Journalists-Nepal.