Submit your Article

The government has presented a Rs 1.79 trillion budget for the fiscal year 2022-23. Critics say the allocation is bloated, given the country’s precarious economic situation. The ‘populist’ budget has been bought with the one and only intent of pleasing prospective voters, they argue. Is that really the case? ApEx talked to Achyut Wagle, professor of economics at Kathmandu University School of Management. 

What are the positive points of this year’s budget?

The budget is not very ambitious and is largely a ritualistic continuum of the past. It has expanded by less than nine percent from the last fiscal year. The idea of handing over small infrastructure projects to provincial and local levels is in conformity with the spirit of federalism. Its focus, at least in principle, on increasing productivity, particularly in agriculture, is welcome. The scheme to gradually replace cooking gas stoves with electric induction stoves with the objective of increasing the consumption of domestically-produced hydroelectric power is also a welcome proposition. Farmers’ pension scheme and setting up of a separate fund to increase farmers’ access to agricultural loans, if implemented, can help make agriculture more attractive. Incentives for tourism and export promotions were also desirable. ‘Make in Nepal’ and ‘Made in Nepal’ certainly create some branding vibe and opportunity for Nepali products.

When then are its biggest downsides?

The budget certainly has missed the bull’s eye. In 10 and half months of the current fiscal year, only 33 percent of the capital allocation has been spent. Such a trend is also observed in provincial and local governments. This exhibits Nepal’s serious capacity constraint in resource absorption. This has multiple ramifications. The shortage of loanable funds in banks is a major concern. Infrastructure and development activities naturally get curtailed as a result. This, in turn, affects the overall economy. The budget lacks convincing programs to enhance productivity and create enough jobs. On the front of agricultural productivity, lack of availability of cultivable land for commercial scale agriculture has been a big concern that this budget seems to completely ignore. Incentives, subsidies and rewards will be meaningful if there is production. The budget also has failed miserably to take subnational governments on-board in key programs related to boosting trade and productivity.

There is also a criticism that this budget is populist and election-centered. 

In multiparty competitive politics, it is natural for incumbent forces to make all possible effort to woo voters through populist elements in the budget. This government of five-party coalition is no exception. Extended social security schemes and extensive pork-barrel approach in allocation certainly indicate that. 

But this will certainly put pressure on the exchequer as it is an unsustainably deficit budget. The proposed deficit financing of over 30 percent in an allocation of Rs 1.79 trillion is unsustainable, and financing unproductive populist schemes by borrowing is absolutely undesirable. The national debt has already crossed the 38 percent mark of the revised GDP of Rs 4.85 trillion.

Will this budget help overcome the current economic crisis?

This is the saddest part of this budget. Nepali economy is heading towards a crisis primarily for three reasons. The first is the growing trade deficit that needs to be bridged entirely in foreign currency. Real exports are small due to limited value addition on input-imports. The major source of forex is workers’ remittance, which is always volatile. Our big trade deficit is also an indication of import-dependence even for survival. The budget has failed to take up and address these entangled issues. 

The second issue is the dismal state of capital expenditure. A thorough review of the problems and commitment of structural and legal reforms, for instance in facilitating transparent and timely public procurements including at the local government levels, is missing. 

Lastly, the country faces a crisis in fiscal governance at every level of government. This has given rise to pervasive corruption, irregularities and, the most alarmingly, impunity for financial crimes. 

This budget has deliberately missed these key aspects, which could result in further inefficiency and exacerbate the crisis.

What are the budget’s implementation challenges?

The revenue target may not be achieved without serious reforms in revenue administration. As Nepal’s main revenue source is customs duty, it is vital to break the politician-business-bureaucrat nexus to check under-invoicing of imported goods. But this will happen only with strong political will. 

Sourcing international funds to the tune of around Rs 300 billion (in loans and grants) is definitely daunting. Development partners are unlikely to commit new support until parliamentary elections are over. 

The ‘swadeshi’ sloganeering might just turn out to be a fiasco, as it lacks a mechanism of investment in the productive sector. Viable products for the scheme that have both scope and scale have not been identified; moreover, the possible backward linkage to Nepali products is not even duly thought about. 

Labeling the products that don’t even have 20 percent value addition as ‘swadeshi’ is a mockery of the branding endeavor.

Nepali Congress is set to become the largest party at the local level, with the main opposition CPN-UML relegated to a distant second position, followed by CPN (Maoist Center). Kamal Dev Bhattarai of ApEx talks to senior UML leader Raghuji Pant on local poll results and his party’s plans. 

How does the UML evaluate local-election results?

We had expected to emerge as the largest party from the May 13 elections, albeit with a narrow margin. That did not happen. We were mindful that a split in our party and formation of the five-party electoral alliance could affect our performance. But as the UML had contested the local elections of 1999 and 2017 alone and still emerged as the largest party, we still hoped to retain our strength. But this election’s results have forced us into a rethink.

What other factors could have affected the results?

Like I said, there is a need for a review of the election results inside the party. Again, the alliance among the five ruling parties affected our chances. But I am hearing from across the country that there were internal reasons too. There are questions about the UML not being able to mobilize its organization and strength. Similarly, there are also doubts about whether we were able to provide fair chances to all party leaders. We have to discuss and analyze whether we paid sufficient attention and did enough homework while selecting candidates. But election results do show that our performances in Madhes have improved.

There have also been rumors of ‘intra-party’ betrayal.

I am not aware of such an incident, and I don’t know the situation of our party across the country. The primary factors behind UML’s poor election performance, as far as I can say, were the party split and the five-party alliance. 

Will this election’s outcome lead to the formation of another left alliance? 

In my view, two alliances will likely emerge in Nepali politics. The UML will lead one alliance and the Nepali Congress will lead another. Under our current electoral system, the chances of any one party getting a majority on its own are slim. In the previous elections, the erstwhile Nepal Communist Party received the majority of votes, but we failed to maintain the UML-Maoist Center unity. So I highly doubt that the upcoming elections will see that alliance’s revival. My personal view is that any political alliance should be based on ideology, policy, and concrete programs. 

It is obvious that if a left alliance were to be formed, it should be under the UML, which is the largest left force. But the current political circumstances are not favorable. The Pushpa Kamal Dahal-led Maoist Center and Madhav Kumar Nepal’s CPN (Unified Socialist) are against UML. In this scenario, a left alliance seems unlikely in the near future.

I think the UML should be prepared to contest upcoming elections alone. If it gets a majority it should form a government, if not, it should be ready to play the role of a responsible opposition. In the meantime, the party should also continue its efforts to forge a left alliance.  

Do you think a broad left alliance is a necessity?

The local-level election results clearly show the necessity of forging a left alliance on the basis of ideology, policy, and programs. We want such an alliance but the circumstances are not favorable right now. I am always in favor of an alliance based on a solid ideology and program. And the largest party should lead such alliances. But we are not following such a principle. Our politics went out of track soon after the restoration of democracy in 1990. After 1991, there was a sharp contradiction between the UML and Congress. What went wrong is that the UML aligned with Lokendra Bahadur Chand’s Rastriya Prajatantra Party, which had just 10 seats in the 205-member Parliament. The Nepali Congress, meanwhile, aligned with the Surya Bahadur Thapa-led faction of the Rastriya Prajatantra Party, which had even fewer seats in parliament. 

They were unprincipled coalitions, and weakened parliamentary democracy. We should not repeat such mistakes. 

Like Chand and Thapa after 1990, Pushpa Kamal Dahal has become a key character in fomenting political instability. He keeps changing camps. There should be alliances but all issues should be cleared before the elections. For instance, if an alliance led by UML wins, UML should be allowed to form a government under its leadership. In the same vein, if the Congress-led coalition wins, it should lead the government.  This issue should be cleared before forming an alliance. UML and Congress should not repeat the past mistake by putting fringe parties at the core of their alliances.

According to the World Food Organization, a person needs 91 liters of milk, 48 eggs, and 14kg of meat a year. Former prime minister KP Oli had declared Nepal self-sufficient in meat and eggs on 25 March 2021, claiming that each Nepali was consuming 55 eggs and 22kg of meat annually. But Nepal’s poultry and fish farmers still have a long way to go when it comes to finding good markets and bringing out quality products. Pratik Ghimire of ApEx talked to Tulasi Prasad Paudel, a senior scientist specializing in animal research, who is also director at the government-run National Animal Science Research Institute (NASRI).

What are the institution’s core work areas?

We are involved in livestock farming and fishery. This institution monitors, coordinates, and regulates the capacity-building of farmers and other human resources. Similarly, we cooperate with governmental- and non-governmental organizations as well as educational institutions. Our institute also invents various technologies and distributes them to farmers and agricultural entrepreneurs with additional residential training opportunities.

What are you currently working on?

NASRI is developing new breeds of goats, cows, and buffaloes. For example, crosses of wild buffalo and domestic buffalo have been found to produce robust breeds. We conduct similar research on other animals.

Animal food determines the quality and quantity of milk so we’re developing affordable alternatives to ordinary feeds. Timing of feeding and heat stress also affects milk-production. We are conducting a series of experiments to help animals and farmers on this front as well.

We are developing animal medicine and vaccines. The severity of animal diseases varies on parameters like temperature, altitude, topography, food type, etc. and hence we can't rely on imported medicines.

Is there enough funding for your research?

Developed countries allocate over five percent of their total annual budget to agricultural and livestock research; the minimum global requirement is three percent of total budget. Developing countries generally allocate one to two percent of their annual budget. But in the past three decades, the Nepal government has spared a paltry 0.2-0.3 percent, or just six percent of the minimum recommendation.

What is the scope of animal farming in Nepal?

Good, I must say. We are still dependent on imported milk and dairy products. The Nepali market is filled with international brands of milk powder, cheese, and butter. We are independent in chicken meat and eggs yet there are other types of meats and fish we can work on.

Despite having a good scope, we lack market reach. If the government could increase the access of our local products to the core markets, our situation will drastically improve.

What do you suggest to the individuals who want to get into professional farming?

The farms that are doing profitable business all did good homework before starting out as. They consulted experts, took training, and relied on scientific research. I suggest the same for aspiring farmers and agricultural entrepreneurs.

Nepal’s economy heavily relies on remittances for foreign currencies, which is equivalent to more than 20 percent of its GDP. However, the remittance inflow decreased by nearly six percent in the first six months of the fiscal year 2021/22, according to a recent Nepal Rastra Bank report. This remittance contraction was observed despite an increase in the number of people going abroad for jobs following an improvement in the Covid-19 situation. Priyanjali Karn of ApEx talked to Khilendra Paudel, the CEO of IME, Nepal’s first remittance company, to know about the current remittance situation.  

What role does remittance play in the economic wellbeing of Nepal?

The signing of the Treaty of Sugauli in 1816 ignited the trend of Nepali people migrating to foreign countries for employment, and this continues still. At present, approximately 3.5m Nepalis are working abroad, which accounts for almost 14 percent of the total Nepali population. The hard-earned money that migrant population sends back to their families is a major contributor to Nepal’s foreign currency earnings. The country receives about Rs 900bn in remittances through formal channels. This is about 25 percent of our gross domestic product (GDP). So remittance is one of the major factors that helps maintain the macroeconomic stability and the overall well-being of the country. 

How do you think we can promote formal channels of remittance?

There is an undeniable need to formalize the channels through which remittances enter the country. For this, the role of government is pivotal. Policies in relation to economic growth, interest rate, and exchange rate policies are crucial determinants of remittance inflows. To encourage the inflow of remittances through formal channels, introduction of special incentive packages for the migrant population can serve as a mode of encouragement. This method is currently being practiced by some of the SAARC countries like Sri Lanka, Bangladesh, and Pakistan, whose economies, like Nepal’s, heavily depend on remittances. 

Despite their contribution to the country’s economy, many workers are still being swindled and exploited. What do you think should be done to guarantee the safety of migrant workers?

Ensuring the safety and security of Nepali people migrating abroad for employment has to be the highly prioritized by the concerned government bodies. Entering into a bilateral labor agreement with the countries of destination indeed plays an important role in assuring the wellbeing and security of workers. Nepal has labor pacts with just nine of the 109 major destination countries, namely the State of Qatar, the United Arab Emirates, the Republic of Korea, the Kingdom of Bahrain, Japan, the Hashemite Kingdom of Jordan, Malaysia and Mauritius. Thus, entering into labor agreements with other major destination countries can be the first step toward safe migration. 

How has IME been responsible and accountable to the workers and contributed to the incoming remittances?

For the past 20 years, IME Limited has been serving the migrant workers involved in foreign employment by facilitating them to send back their hard-earned money to their families in the safest, credible, and secure way. No matter the hardship of the situation, IME has always made an effort to make remittance services affordable and accessible. Where IME stands today is solely because of the reliable service we have been offering to the Nepali migrant workers. As a pioneer in formalizing the remittance channel, today, IME takes pride in bringing in remittance money from more than 100 countries.

IME is not just a remittance company but also a conglomerate of businesses. One key area where the group works is capital market. Why do you think Nepal should focus on connecting remittances to the capital market?

We are well aware of public enthusiasm for the IPO (initial public offering) and share market. This can be one of the best opportunities for Nepal to leverage the interest of the public by connecting remittances to the capital market. Allocating a quota for the migrant population can promote formal channels as well as encourage investment in productive sectors.