According to him, the budget deficit in the current fiscal year has already reached Rs 271bn which has played a role in the rapid increase of internal debt. “The more the deficit, the greater the expansion of debt. The remaining months of the current fiscal year will see an increase in debt level with the government expediting public spending,” said Adhikari.
He said there is a need for a big policy leap to escape from low fiscal space and structural problems and the new budget has principally indicated something towards this end. “However, the budget allocation under different headings has failed to signal the government’s readiness toward structural changes in the economy,” he said, adding, “While the new budget talks about policy reforms and reducing expenses, its relationship with budget allocation and other aspects is not well established. The downsizing of capital expenditure shows inefficiency in overall budget allocation.” Speaking on the occasion, former finance minister Khatiwada said the post-2006 practices of the government have led the economy to a policy trap and its effects are increasing now. According to him, the current situation is the result of competition among the political parties that have led the government over the years to introduce distribution-oriented programs. “We focused on distributive fiscal policy to resolve the problems of conflict, keeping the production-oriented approach in shadow. Some of the policies taken during the natural calamities also created problems. After the 2015 earthquake, the governments competed for providing grants by taking loans for post-earthquake construction,” said Khatiwada. Stating that a six percent economic growth target mentioned in the budget is appropriate for bringing the economy out of the recession, Khatiwada said that the investment required for this will be insufficient. He suggested the government avoid raising too much internal debt as Nepal's economy is falling into a debt trap. Finance Minister Prakash Saran Mahat admitted that the economy has fallen into a policy trap. “It is clear that we are in a very difficult situation,” he said. “There is no easy escape from the policy trap. But by accepting the problems, we can find ways to resolve the issues. With the budget, we have attempted to initiate economic reforms and expand the economy.” According to Mahat, while the capital expenditure has been reduced for the next fiscal year, the budget has announced measures for the effective utilization of the money allocated for development works. “If capital expenditure is utilized properly, foreign aid will also increase and this will ease the pressure on resources,” he said, adding that the government’s next focus will be on implementing the budget. Prakash Saran Mahat, Finance minister There is no easy escape from the policy trap. But by accepting the problems, we can find ways to resolve the issues Shiva Raj Adhikari, Head, Central Department of Economics, TU While the new budget talks about policy reforms and reducing expenses, its relationship with budget allocation and other aspects is not well established. The downsizing of capital expenditure shows inefficiency in overall budget allocation Yubaraj Khatiwada, Former finance minister We focused on distributive fiscal policy to resolve the problems of conflict, keeping the production-oriented approach in shadow
