Business leaders concerned about budget size

Prime Minister Pushpa Kamal Dahal has been stating in various forums that a budget of up to Rs 1.9trn would be needed for the fiscal year 2024/25.

The private sector, meanwhile, has been saying that a larger budget would have an adverse impact on them. Speaking at a pre-budget roundtable recently, business leaders said a large budget size will put pressure on resources, and as revenue and tax rates will have to be increased for this, ultimately the private sector will have to bear the brunt. They said that the government should bring a budget that can be implemented rather than focus on its size. In their suggestions to the finance ministry, which is preparing the budget for the upcoming fiscal year, they have requested the government to not exert pressure and dampen the morale of the private sector.

Rajesh Kumar Agrawal, President of the Confederation of Nepalese Industries (CNI), said that if the government focuses on a large budget, it will put pressure on the private sector. “This will help neither the government nor the private sector,” he added. “A wrong narrative is being created that credit extended to the private sector is being misused. This should be corrected.”

Likewise, Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), urged the government to bring a budget that can be implemented. “Since we recently held the 2024 Nepal Investment Summit, the coming fiscal year should be taken as the beginning of the investment decade. It seems that the monetary policy was not in sync with the budget. As a result, the government is not being able to achieve what it intends to achieve,” he added. Likewise, Nepal Chambers of Commerce (NCC) President Kamlesh Agrawal requested the government not to increase tax rates that would put an additional burden on the private sector. “Rising tax rates alone do not guarantee revenue growth. It can encourage smuggling,” he added.

Sunil KC, president of the Nepal Bankers’ Association, complained that construction entrepreneurs have been adversely affected as the government has not increased the size of capital expenditure which has ultimately led to an increase in bad loans in banks. “The construction sector accounts for the highest non-performing loans (NPLs) in the banking system. This situation has arisen because the government failed to make capital expenditures,” he added.

Likewise, Upendra Prasad Paudyal, president of the Bank and Financial Institutions Association of Nepal (BFIN), said NPL levels in the banking system can be controlled if the government is flexible towards the construction sector. “The government should encourage construction even by issuing bonds if needed. If that sector rises, NPLs will decrease, and other sectors will also improve,” he said.

On the other hand, Ganesh Karki, president of the Independent Power Producers’ Association (IPPAN), suggested that the budget give special priority to the hydropower sector, as hydropower construction not only generates electricity but also builds roads, triggers market expansion, and creates employment simultaneously.Similarly, Karan Kumar Chaudhary, president of the Nada Automobile Association of Nepal, complained that the government has forgotten the automobile sector. He said that the automobile sector has fallen victim to double taxation.

Economist Prof Dr Achyut Wagle suggested making bold decisions and showing courage for reforms, as the sectors traditionally considered the backbone of the economy are currently facing problems. “Nepal is falling behind as it has failed to identify and develop potential sectors. There is a need to explore new revenue sources,” he added. Likewise, Resham Thapa, head of the Department of Economics under Tribhuvan University, said local units shouldn’t be undermined while preparing the budget.