Govt lowers growth rate- Supplementary budget on agenda

Looks like Nepal is not yet out of the woods economically despite great optimism following initiation of the peace process.

Govt lowers growth rate- Supplementary budget on agenda
TKP, Feb 15, 2007

Amid lingering political turmoil, the government on Thursday scaled-down economic growth rate and clearly hinted at bringing out a supplementary budget to adjust ballooning unplanned expenditures.
The mid-term evaluation of budget for the current fiscal year released today also lowered the projected economic growth rate for the running fiscal year to 3.8 percent from the annual target of 5 percent.

Finance minister Dr Ram Sharan Mahat blamed continuing messy industrial environment and poor performance of agriculture sector for the less-than-targeted economic growth.

Dr Mahat also said the government will be compelled to bring a supplementary budget in the last quarter if the government fails to mobilize additional foreign assistance needed for the ongoing peace process.

“The demand of non-budgetary expenditures has scaled up to a record Rs 15.65 billion and most of them are essential for the ongoing peace process. If we cannot mobilize huge foreign assistance through the newly formed 'Peace Fund' then we have no option other than to adjust expenditures through a supplementary budget,” he said. However, he made it clear that the proposed supplementary budget will not change tax rates.

The mid-term evaluation report stated that the Ministry of Home alone has demanded almost Rs 10 billion worth of non-budgetary expenditure followed by Rs 1.53 billion by Election Commission and Rs 1.58 billion by Ministry of Water Resources.

According to preliminary estimates, the total recurrent expenditure is expected to increase by 5 percent while the total capital expenditure is expected to remain at just 85 percent of the total earmark. The total expenditure is expected to remain about 97 percent of the earmarked Rs 143.91 billion. The government for the current fiscal year has earmarked Rs 83.77 billion for recurrent and Rs 44.96 billion for capital expenditure.

Likewise, the government has also lowered the planned mobilization of foreign grants and loans to Rs 19.19 billion and Rs 14.95 billion from its annual estimate of Rs 23.73 billion and Rs 16.91 billion respectively.

According to the report, total foreign assistance mobilization is expected to be less by Rs 6.50 billion during the current fiscal year. “We are still trying to mobilize maximum assistances as possible and I am optimistic we will be able to meet the target,” he said. The government slightly upscaled the target of revenue mobilization to Rs 85.90 billion from previous budgetary target of Rs 85.37 billion.

Referring to low expenditure of capital expenditure, which mainly finances development activities, Dr Mahat blamed pessimistic performance of major development projects and politically inactive local bodies for the low absorption of capital expenditures. “The government doubled the grants to local bodies in the expectation that they will push forward their activities. However, they remained inactivate mainly due to lack of political consensus at the local level,” Dr Mahat said.