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The resource crunch that the government is currently facing after failing to meet the revenue target has not prevented ruling political parties from announcing populist programs which are sure to increase the state’s long-term liability.

One of the announcements made through the Common Minimum Program (CMP) by the ruling parties on Monday is increasing the number of social security scheme beneficiaries to six million in the next five years. If this announcement is materialized, the number of beneficiaries will almost double in the next five years. As of the last fiscal year 2021/22, there were 3.57m beneficiaries of social security.

As per the 2021 population census, Nepal’s population is 29.19m. Providing a social security allowance for 6m means the country’s one-fifth of the population will receive a cash dole-out. The CMP talks about providing cash dole-outs to elderly people, widows, single women, disabled people, members of communities on the verge of extinction, and different categories of children with a certain allowance from the state. While announcing the plan, the ruling parties have not disclosed how the state could generate the resources to meet the resources needed for increasing the both number and amount of social security allowance.

Economists say it was an irresponsible act on the part of the ruling parties to announce a new dole-out package at a time when the government is struggling to meet even existing recurrent expenditure from the revenue. As of Jan 9, the government collected revenue of Rs 385.73bn while its administrative expenditure stood at Rs 436.23bn, according to the Financial Comptroller General Office.

“It is quite expensive for the state to provide a social security allowance of one in every five persons,” said a former finance secretary. “It is too big a number and making an increased number of people dependent on the state when there is no extra source of income is not sustainable in the long-term.”

Economist Posh Raj Pandey said that the government should have streamlined the social security scheme. “What is happening now, is in terms of socio-economic perspective, those who’re entitled are not getting, and those who’re not entitled are getting the scheme,” he said.

Economists say the government could spend a higher amount of state resources on improving the quality of health and services and make these services affordable to the majority of people instead of doling out cash for individuals. Cash doll out is a misguided priority of the political parties just to get political benefits. It should be very targeted and should be available to only limited people, they say.

Over the last several years, the number of beneficiaries of social security allowance and the amount to be given to each beneficiary has been rising rapidly. There were 2.04m beneficiaries of social security allowance in fiscal 2011/12 which increased to 3.57m in the last fiscal 2021/22. The amount being spent on them has however been rising even faster. For example, the government spent Rs 68.61bn on social security allowances in the fiscal year 2020/21, according to the Department of National ID and Civil Registration.

The government is expected to spend nearly double that amount in the current fiscal year due to an increased number of beneficiaries and an increased amount for them. The government has allocated Rs 105bn for social security allowance in the current fiscal year, according to the Finance Ministry.

Despite the growing burden of social security allowances, successive governments have continued adding more beneficiaries and expanding the purview of social security. While presenting the budget for the fiscal year 2021/22, the then KP Sharma Oli-led government increased all social security allowances by 33 percent, including the elderly allowance to Rs 4,000 per month from Rs 3,000 per month.

A year later, the Sher Bahadur Deuba-led coalition government, reduced the eligibility age for receiving an elderly allowance to 68 years from 70 years at a time when Nepal’s life expectancy has been rising. As a result, a total of 113,911 new beneficiaries were added to the elderly list due to the lowering of the eligibility age during the first quarter of the current fiscal year, according to the Department of National ID and Civil Registration. Besides the natural rise in the number of beneficiaries, lowering of age limit increased the number of beneficiaries substantially.

According to a World Bank report, the overall public spending on social protection rose rapidly in Nepal for a decade—from the fiscal year 2010/11 to fiscal 2019/20. According to the report, the government’s spending on overall social protection was Rs 26 billion in the fiscal year 2010/11, which surged to Rs 189bn in fiscal 2019/20, which includes both cash dole-out and other social protection programs.

The first social security scheme in Nepal was launched in 1994/95 by the government led by the then CPN (UML) leader Manmohan Adhikari. The scope of the scheme, which started by providing Rs 100 a month to the elderly, was gradually expanded to include other types of beneficiaries.

The price of gold has dropped by Rs 300 per tola in the domestic market on Wednesday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow bullion is being traded at Rs 103, 200 per tola today. It was traded at Rs 103, 500 per tola on Friday. Meanwhile, tejabi gold is being traded at Rs 102, 700 per tola today. Similarly, the silver is being traded at Rs 1, 365 per tola.

The Nepal Stock Exchange (Nepse) crossed the 2200 mark on Monday for the first time in the last seven and a half months. Backed by impressive growth in the demand for shares of the hydropower sector, the Nepse index closed at 2211.38 points on the second day of the trading week. The last time when the Nepse index was over 2200 points was on May 27, 2022. Crossing this level has been seen as 'psychologically important' for stock investors as many are hoping for a bull market rally in the coming days. On Monday, the Nepse posted a gain of 2.16 percent while daily turnover stood at Rs 5.31 billion. With the investors continuing buying of shares on the back of the Nepal Rastra Bank amending guidelines on working capital loans on Wednesday and hopes that banks will reduce interest rates for the month of Magh, the stock market ended the first trading day of the week with a gain of 46.76 points. There has been an increment in the volume of traded shares in the past week. And, on Sunday, the number of traded shares increased by 16 percent compared to that of last Thursday. A total of 14.67 million shares were traded on Monday compared to 12.48 million shares of Sunday. Except for hotel and tourism, all the other sub-indices turned green on Thursday with the hydropower sub-index recording the highest 4.94 percent gain. Ridi Power Company recorded the highest turnover of Rs 206.8 million while the shares of Ngadi Group Power Limited were the most traded. On Monday, seven hydropower companies' share prices hit the positive circuit after increasing by 10 percent while seven other hydropower companies' share prices rose by more than nine percent. The share price of Barun Hydropower Company, Khanikhola Hydropower Company, Chhyangdi Hydropower, Joshi Hydropower Development Company, Himalayan Urja Bikas Company, Union Hydropower Limited, and Singati Hydro Energy Limited increased by 10 percent hitting the circuit breaker. The confidence of stock investors returned after the new government assured that it would address problems in liquidity management and will work to bring down the persistently higher interest rates. With the liquidity in the banking sector gradually improving, stock investors said they are now getting phones from the banks and financial institutions (BFIs) requesting them to take margin loans. As per Nepal Rastra Bank data, the banking system currently has Rs 12 billion in excess liquidity which indicates. This indicates interest rates will come down in the coming days.  

The Nepal Stock Exchange (NEPSE) plunged by 21. 34 points to close at 2,190.42 points on Tuesday. Similarly, the sensitive index dropped by 0. 77 points to close at 419. 14 points. A total of 20,843,952 unit shares of 254 companies were traded for Rs 7. 65 billion. Meanwhile, Barahi Hydropower Public Limited was the top gainer today with its price surging by 9. 99 percent. At the end of the day, the total market capitalization stood at Rs 3. 16 trillion.