Finance Minister Yubaraj Khatiwada’s announcement on February 12 that the government was slashing the annual budget by nearly 10 percent was only the final confirmation of the headwinds facing the Nepali economy. The plan of bringing in two million foreign tourists during Visit Nepal 2020 has been badly hit by the coronavirus scare. Chinese folks, who were expected to make a big contribution to Visit Nepal, are now staying put in their own country. Nepali banks that had invested heavily in hospitality in anticipation of the Visit Nepal tourist bump now fear their loans could sour. Inflation is already a worrying 6.4 percent, and given the turbulent state of the Indian economy, could further rise. Foreign aid and grants are down.
But perhaps the biggest problem is, once again, the government’s failure to spend. In the first six months of this fiscal, just 15.4 percent of the allotted capital budget was spent. Likewise, only 29.9 percent of the budget under ‘financing’ head was put to good use. The Oli government likes to talk up its focus on ‘big ticket’ infrastructure and yet of the Rs 10 billion allocated for the national pride projects, only 19 percent was spent. Yet while announcing the revised budget on February 12, Khatiwada sounded an optimistic note. He said the government still expects to spend over 80 percent of the capital budget, over 90 percent of the financing budget, as well as meet its growth (8.5 percent) and inflation (under 6 percent) targets.
Khatiwada pointed to the narrowing trade deficit and the healthy performance of the agriculture sector as reasons for optimism. He also cited higher spending on roads, hotels and hydropower as further cause for cheer. Yet Khatiwada surely knows Nepal’s economic fundamentals are still astray, starting with its perennial inability to spend. Despite PM Oli’s commitment to root them out, cartels and syndicates still sit atop all important sectors. The government has looked on helplessly as chicken farmers artificially increased poultry prices by killing off chicks and burying unhatched eggs. Nor has the government been able to crack down on dilly-dallying contractors.
The Nepali economy seems to be on autopilot. The government, and its cerebral finance minister, it appears, could not do even the bare minimum to gin up the economy, in what is turning out to be among the signature failures of the mighty two-thirds communist government. or SAARC as two regional bodies have dif