Minister for Finance Janardhan Sharma has said the government is set to replace the budget of the current fiscal year introduced through an ordinance.
Presenting 'Information on the Current Economic Situation of the Country' in the House of Representatives today, Finance Minister Janardhan Sharma said that the government has provided information about the real state of the economy as per the needs of the country.
He said that when the current government took over the responsibility, a statistical glimpse of the state of the country's economy was presented and it was targeted against anyone. Finance Minister Sharma informed that a bill will be introduced to replace the ordinance budget issued by the previous government. "I will soon introduce a replacement bill to address the common minimum program agreed between the ruling parties, the policies and priorities of the current government, the people's aspirations and the challenges posed by the COVID-19 pandemic," he said.
Stating that controlling the COVID-19 pandemic is the primary duty of the new government, Minister Sharma shared that about 10 million doses of vaccine have been received in Nepal so far.
Minister Sharma told the house that the earthquake-affected economy was gradually moving towards a positive direction when it has been hit again by the COVID-19 pandemic.
Economic growth did not go as planned
Against the backdrop of high economic growth of 8.6 per cent in FY 2073/74 and 7.4 per cent in FY 2074/75, the previous government with a very comfortable majority had targeted to achieve of 8.0 per cent but it was limited to 6.4 per cent in 2075/76.
Presenting the fact that the economic growth target of 8.5 per cent in FY 2076/77 has turned negative by 2.1 per cent, the Finance Minister said that the economy has not improved significantly in FY 2077/78 and the economic growth rate is estimated to be 7 per cent through the current budget is not likely to be met.
The contribution of the industrial sector, which is the main basis of economic prosperity, to the GDP and the contribution of the manufacturing industry to it, which is currently only 5.1 per cent, has weakened the base of the economy.
Inadequate internal and external investment in the productive sector, trade-oriented investment rather than production-oriented, higher production costs, lack of government spending capacity, the weak link between economic growth and job creation, unequal distribution of economic growth benefits, lack of informal sector share in the economy are problems in the economy since a long time, reads the fact paper.
In recent years, the inflation of commodities and services was maintained at a certain level. The inflation rate was five per cent in the past three fiscal years while the inflation in the first 11 months of the last fiscal year was limited to 3.6 per cent. However, risks loom large for increased inflation rate due to the ongoing rise in economic activities and price hike of the petroleum products in the international market.
Likewise, the consumption ratio in the GDP was 87 per cent in the fiscal year 2073/074 BS and it is expected to remain 93.4 per cent in the fiscal year 2077/078 BS.
Similarly, national saving in proportion to GDP was 41.7 per cent in the fiscal year 2073/074 but it is expected to remain 31.4 per cent in the fiscal year 2077/078, meaning that saving in the economy could not grow as expected resulting in slow progress in capital formation.
Furthermore, Minister Sharma said that the country's capital expenditure could not increase in the past three years adding that the federal government's capital expenditure in the fiscal year 2077/078 BS remained just 19.35 per cent out of total expenses of Rs 1180 billion.
The government has also stated that the previous government increased the size of the budget to gain much more publicity even by discarding the budget implementation capacity.
The government concluded that fiscal discipline could not be maintained as the trend of spending in the last month of the fiscal year remained unabated and the budget could not be spent as per the priorities and plans.
Furthermore, the fact-paper states that expenses in the last month of the fiscal year remained an average of 23.1 per cent in the last five fiscal years.
The fact-paper has also included that the previous government prepared the budget without considering the state treasury which resulted in the poor credibility towards the budget.
As mentioned by Minister Sharma the state treasury is in the deficit of Rs 216 billion in the fiscal year 2076/077 against Rs 48 billion of 2074 BS.
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