Economists and former bureaucrats have cautioned the government that the amounts realized in public borrowing are not being spent in productive sectors, giving the state an overburden of financial liabilities.
Speaking at a pre-budget discussion jointly organized by the Economic Development and Administration Research Center and the National Economic Stakeholders Society Nepal, the analysts said that the government expenditures in social security have failed to generate employment and capital formation.
“In addition, the loans accepted realized from public borrowing are being used for unproductive purposes,” said former chief secretary of the Government of Nepal Leela Mani Paudyal, adding that the defective policies adopted by the government in the past three decades have resulted in the current economic problems.
At present, the economy has been facing the major challenge of fiscal imbalance created by a massive fall in revenue collection and expanding recurrent expenditure. Although the government has been recommended to exhaust the country’s scarce financial resources, the government has failed to prioritize the programs accordingly.
Professor Shiva Raj Adhikari, head at the Department of Economics, Tribhuvan University, said the government needs to address the systemic problems. “Although the investment has been made to some extent, it has failed to help achieve economic growth and employment generation as expected.
According to the Ministry of Finance, the liabilities of the public finance to settle the principal and interest amounts have increased massively amid a dramatic fall in the collection of government revenue. The government will be facing an additional burden of the debt servicing of the loans that the state took for the post-earthquake restructuring and rehabilitation.
Govt still not prudent to bring in proper budget for next FY
While there is a growing call for the government to introduce a realistic budget and limit the expenditure size in the financial plan for the next fiscal year, the government is still found to be on the side of announcing a populist budget.
An official at the Ministry of Finance (MoF) said that Prime Minister Pushpa Kamal Dahal is exerting pressure on Finance Minister Prakash Sharan Mahat to introduce a bigger size budget for the fiscal year 2023/24. The National Planning Commission has fixed a ceiling of Rs 1.688 trillion for the government to enforce the budget.
According to the MoF source, the ministry has been looking forward to announcing the government expenditure of only around Rs 1.50 trillion. But Prime Minister Dahal has been forcing the ministry to bring a budget of at least Rs 1.70 trillion.
The economists have been putting stress on the need for a massive restructuring in the government’s financial system to ensure effectiveness of the budget. While the capital expenditure stands pathetic almost every year, the last hour spending often gives rise to poor quality infrastructure.
