Nepalese parliament. Photo: Wikipedia

Nepal’s analysts and economists have kept the tradition of metaphorical expression alive to comment on the government’s annual budget. It is little wonder that the country’s annual budget presented for the new fiscal year submitted to the joint sessions of the parliament on May 30 invited a barrage of metaphorical comments – representing all the hues and colors of the political spectrum. Nepal’s fiscal year runs from mid-July to mid-June.

Dr Yuba Raj Khatiwada, Nepal’s finance minister, presented his second budget of the incumbent government led by Prime Minister K P Sharma Oli. The pre-poll alliance between two communist factions headed by Oli won a majority in parliamentary elections in late 2017.

The most common and usual metaphor this budget is greeted with by the mainstream broadsheet dailies and liberal elites is “bitaranmukhi.” The literal meaning of bitaranmukhi is distributional/distributive, which is also used interchangeably for the English words “populism” and “populist,” since these two words have no nearest-peer in Nepali.

The bitaranmukhi metaphor along with a recent example of how Venezuela slipped into chaos because of distributive and populist policies and its parallel to Nepal made many rounds in the social media. However, the contrast between Nepal and Venezuela ends here.

The proportion of expenditure proposal, revenue target, and domestic debt are 38.5%, 27.9% and 4.9% of gross domestic product. The projected revenue growth of 25% in the next fiscal year over the current fiscal is also realistic, since Nepal’s annual revenue has recorded a compounded annual growth rate of around 20% for over the past several years. Increased budget outlays to the education, health and social sectors, as well as an adequate budget outlay for ongoing infrastructure programs, are some of the highlights of this year’s budget.

The detractors, however, claim the budget is a blatant violation of macroeconomic principles.

Rameshwor Khanal, a former secretary at the Ministry of Finance and a public intellectual in his post-retirement avatar, is one of the very few liberals who defended the macro-economic credentials of the budget.

The finance minister has a few sops to please the doubters.

  • Fifty percent increase to the monthly social-security allowance of 2,000 rupees to nearly 1.3 million senior citizens and marginalized people. Nepal’s first democratically elected communist government, that of the late Manmohan Adhikari, introduced this scheme in 1994. The tradition of increasing the monthly allowance has been kept alive by both the Nepali Congress Party (NCP) and the communist governments because of the vote-spinning potential of the scheme.
  • The lowest taxable ceiling is raised, benefiting low-income households, and the civil service will receive a salary hike. The raising of the lowest tax ceiling and the salary hike are a double bonus for the civil servants. The urban middle class of stock investors got their demand fulfilled in terms of a reduction in the capital gains tax, the promise to allow foreign investment in the capital market, among others.

Proof of the pudding is in the eating

The finance minister has proposed significant administrative reform to address “low absorptive capacity” – lack of ability to spend the planned amount. Recruitment of project managers to look after the construction of critical infrastructure, through open competition against civil servants taking charge, is planned. The open recruitment of project chiefs might be a trifling matter in many developed countries but is a significant departure in Nepal’s context.

Khatiwada expects the economy to grow by 8.5% this fiscal year. However, I have a firm conviction that Nepal has all it takes to grow at a double-digit rate and could become South Asia’s next growth leader after India and Bangladesh. There are several reasons for my optimism.

  • First, a number of legal and administrative measures such as the enactment of the Foreign Investment Act, the Public-Private Partnership and Investment Board Act and the One-Stop-Service Center for international and large-scale domestic industries are the necessary foundations that the incumbent government has already created. These provide a basis for the follow-up and facilitation of the investment proposals received during the second investment summit held in February.
  • Second, the fiscal year 2019-20 will be historic for Nepal from an infrastructure-development point of view. Nepal will add nearly 1,000 megawatts of hydroelectricity capacity, doubling the installed capacity, potential to complete reconstruction of the private houses damaged in the earthquake in 2015, and the second international airport will come into operation by the end of this year. The increasing electricity usage by the industrial sector shows a potent measure of industrial expansion.

However, several challenges to the Nepalese economy persist in the days ahead. Reining in administrative expenses, notably security-related expenditure, is a significant challenge. The size of Nepal’s security forces multiplied during the decade-long conflict that ended in 2006.

I suggest that a Nepalese version of the smart Li Keqiang Index is developed to monitor economic trends instead of getting buried under a heap of economic indicators. The index, named after the Chinese premier to analyze the trend of the Chinese economy, relies on three indicators: energy usage, cargo transported by train, and commercial lending.

I propose electricity usage by the industrial sector and commercial lending and diesel consumption as the panel indicators to assess the trend of Nepal’s economy.

Navin Subedi

Navin Subedi is a Kathmandu-based freelance development consultant. He can be contacted at

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