More politician, less finance minister
Finance Minister Bishnu Prasad Paudel is contributing to economic stagnancy. The price of this is being paid mostly by small and medium enterprises (SMEs). His focus is more on party politics rather than the economy, even though he has been successful in presenting himself as a private sector-friendly finance minister, at least when compared to his predecessor Yubraj Khatiwada. His political acumen perhaps helped him craft this image of an efficient finance minister, but that has hardly been the case. He has neglected the fact that government intervention and support in various sectors are most critical at this difficult time.
The government has reduced capital expenditure for fiscal 2020/21 by nine percent, the reduction attributed mostly to the Covid-19 pandemic-induced lockdown and restriction on businesses. Only 15 percent of total budget allocation for national pride projects has been spent in the fiscal’s first six months. These two examples indicate how little has been done so far and what a whole lot remains to be done in the current fiscal. But respective government agencies seem unconcerned, and this is where FM Poudel is missing the opportunity.
Poudel came to the position with no ambition for the economy. Probably, that is why less is expected of him. But history will not be kind to him when it assesses his contribution to steering the economy in these most challenging times. Since his appointment as finance minister in October 2020, he has been successful in boosting the capital market. As he completed his 100 days in the position, the share market soared, even as the productive sector struggled to recover from the pandemic.
Unlike many of his predecessors, Paudel saw no value in presenting a complementary budget for the current fiscal. But that has led to confusion over possible government help for the hardest hit people and sectors. He has been saddled with a budget that was prepared by Khatiwada, who was not a favorite of the private sector during his stint as finance minister. The country is riveted on its uncertain political future and Paudel is thus being spared for not delivering on the economic front. This, in turn, will be in Paudel’s favor while his success as finance minister is assessed.
What he has achieved so far is negligible compared to the enormous task he has in his hands. For one, he needs to pump more money into productive sectors. But the budget’s mid-term review indicates public sector expenditure is going to remain dismal throughout the fiscal, hampering overall economic growth.
Poudel seems to be good at managing expectations of the private sector and development partners. But he has so far failed to come to the aid of job-seekers and businesses in need of easy access to finance in the pandemic-battered economy. Most of his time is going into managing the country’s political fiasco while his sole focus was supposed to be getting government agencies to maintain high public expenditure to keep the economy afloat in the midst of a looming crisis.
Although most of the economic indicators seem to be okay, there is a deep structural problem in our remittance-driven, consumption-led economy. This was the right time to address that problem in order to boost productive sectors and create more jobs. But as we head towards the end of this fiscal, the fear is that the economy could again re-enter the self-defeating remittance cycle.
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