The Nepal Communist Party (NCP) Chair and Nepal Prime Minister KP Sharma Oli was received amidst opposition parties’ critical uproar in the Parliament on January 06, 2019.

This was the first time Oli addressed a parliamentary session ever since the winter session began on December 26, 2018.

PM Oli’s speech focusing on his government’s efforts for Nepal’s progress throughout the first year of his regime spanned higher growth, curbed-corruption, and improved law and order situation.

However, Oli’s presentation of Nepal’s progress path didn’t seem to satisfy its main opposition Nepali Congress (NC), whose lawmakers were quick to sought clarifications.

NC lawmakers Dilendra Prasad Badu and Minendra Rijal were first to seek permission from Speaker Krishna Bahadur Mahara to speak to Oli. But the Speaker refused their request after Oli clearly stated that he did not want to take any questions from the opposition.

A number of lawmakers from Oli’s own NCP opined that his parliamentary address was ill-timed and could have waited until his party completed its first term in office.

PM Oli emphasized seven indicators of the budget implementation and their status during the parliament including the balance of payment, capital expenditure, economic growth, employment revenue collection & financial situation, implementation of flagship program and progress made in the implementation of national pride projects.

Following are the major points presented by Oli at the Parliament:

• Nepal’s revenue collection increased by 32% in the first five months of the current fiscal Y-o-Y
• Capital expenditure increased by 25.33 percent in the first five months of the review period while government expenditure reduced to 14 percent from 34 percent last year
• Inflation rate decreased to 3.7 percent from 4.2 percent in the previous year
• Foreign aid increased by 162.72 percent compared to last year, whereas the total pledged foreign aid and loan stands at NPR 112.13 billion
• Nepal exports in the first five months of FY 2018-19 increased by 12.3 percent

The government decided to grant five percent concession on 15 exportable goods and three percent on 11 exportable items to promote export

• National Pride Project Gautam Buddha Airport in Lumbini has been fast-tracked to conduct a test flight by June 2019 with a deadline of six months for the apron and runway construction
• Works on the Upper Tamakoshi project for test production to be conducted by August 2019 are being carried out
• A detailed project on the EastWest Railway has been completed and resources are being arranged for railway construction in the Kakadvitta-Butwal section

Energy:

• Oli said that since this government’s formation, electricity meters have been installed in 30,000 houses and electricity theft was reduced by 3 percent
• In terms of clean energy, biogas plants were installed in 10,561 households including 80,990 solar plants and 40,362 improved stores
• With the Nepal government’s initiative, India amended its energy trade directives enabling Nepal to provide surplus electricity to third countries through India
• The government forged an agreement between Bangladesh and Nepal on electricity trade
• As part of its initiatives, the Oli-led government is working on war-footing to finish the laying of petroleum pipeline between Nepal and India before the deadline

Railway:

Providing the status on railway achievements he said:

• The prefeasibility study on Kerung-Kathmandu railway has been completed and works are underway to prepare a detailed project report
• Preparations for a prefeasibility study of Kathmandu-Pokhara-Lumbini railway are underway, with support from China
• Nepal government has signed an agreement to prepare a Detailed Project Report for Raxaul-Kathmandu railway with India’s support
• Preparations are underway for establishing Nepal Sheep Office and appointing a Sheep Registrar

The Prime Minister also added that a Public Transportation Authority will be formed to manage post-syndicate turmoil in the transportation system. He hailed his administration’s efforts to control crime stating that the Police Administration achieved 96 percent success in curbing crimes.

However, Oli’s report failed to discuss some of Nepal’s major concerns, for which, he received severe criticism from opposition parties and raised questions on his role.

Downsides of PM Oli’s Rule

Following are the discrepancies observed in Oli’s presentation:

• Indifference to Business Community: Finance Minister Khatiwada and Industry Minister Matrika Prasad Yadav failed to be empathetic towards the business community’s problems despite three leading private sector’s umbrella bodies’ attempts to pressurize the incumbent government for creating favorable investment climate.
• Nepal Aviation Scam: Oli irked many when he didn’t comment or speak anything about the NPR 4.35 billion aviation scam. The case stands as one of the biggest corruption scams in Nepal at a time when Oli advocates his government’s attempts to restore good governance and eradicate corruption.
• Rising Trade Deficit: Nepal’s growing trade deficit has been a matter of concern for quite some time. However, PM Oli made no mention about the alarming trade deficit and declining foreign direct investments. The two concerns were one of the commitments that two-thirds of the government pledge to improve during its budget speech. Nepal’s trade deficit stands at NPR 458.48 billion in the first four months of FY 2018-19 and has tipped off the country’s Balance of Payment (BoP).
• According to Nepal Rastra Bank’s Current Macroeconomic and Financial Situation of Nepal report, the country’s export-import ratio dropped to 6.1 percent from 7.4 percent in the last fiscal year.Oli advocated that the trade deficit increased by only 1.5 percent in the first three months of the current fiscal but without any supporting statistics.
• According to the NRB report, the country’s overall BoP in the first four months stood at a difference of NPR 57.33 billion compared to the surplus of NPR 2.40 billion in the same period last year.

“Import of industrial goods and construction material has increased by 40.6 percent and this has hit the balance of payment. But this is a positive indicator for the country’s production and development,” reads an excerpt from Oli’s speech.

• Capital Expenditure Progress: Nepal’s capital expenditure made slight progress but attested that the government failed to deliver its promises of ensuring higher growth and employment. The capital expenditure remained at NPR 26.01 billion compared to NPR 17.86 billion in the previous year. Statistics until Sunday projected a 15 percent progress in the capital spending plan of NPR 313 billion even though more than half the review period has passed by.
• Drop in Foreign Direct Investment: Nepali witnessed a decline of over 50 percent in the first four months of the fiscal despite government claims about improving the FDI flow in Nepal by clearing legal and policy hassles. Nepal’s FDI flow trickled to NPR 4.95 billion from NPR 10.17 billion during first four months of the previous year. PM was quick to defend this claim with a sharp remark stating that the number of foreign investments increased by 25 percent. However, Oli 14-page document failed to attest related numbers.

• National Pride Projects: Most of the national pride projects works remain unsatisfactory. However, Oli pointed the progress in several projects including Babai Irrigation Project, Bheri Babai Diversion Project, Gautham Buddha International Airport, Pokhara International Airport, and the Upper Tamakoshi project.Despite Oli’s attempts to fast-track the project’s final works on his trip to Dolakha in April 2019, the project has failed to make headway. Oli claims that 97.5 percent of the project work is complete however, he did not provide any progress figures when he assumed office. Nepali Congress leader Gagan Thapa said that the information presented by PM Oli was similar to Finance Minister Khatiwada’s White Paper presentation of Nepal’s Economic status.
  

“The White Paper had tweaked economic information to fit Khatiwada’s approach to show the economy in a bad shape, and Oli has now done the same. Oli has manipulated information in his speech. He has also tried to threaten his critics about the procurement of project war room in his office,” said Thapa.

• Nepal Migrant Workers to Malaysia: Thapa further pointed out at the situation of Nepal Migrant workers to Malaysia which is still at standstill despite a MoU being signed by both nations.

“Oli remains silent why the outflow of migrant workers to Malaysia has not yet started but claims that the remittance collection has grown due to administrative reforms,” adds Thapa.

PM Oli states that the number of migrant workers declined by 41 percent but the remittance inflow increased by 36 percent.

Besides, while Oli presented a good picture of Nepal’s economy at the beginning of his speech, it’s a well-known fact that just nine months before this statement, Finance Minister Yubaraj Khatiwada introduced a white paper which depicted a shoddy state of the country’s economy.

Other untouched/less discussed issues include 13-year old Nirmala Pant’s case and President Buda Devi’s purchase of expensive means of transport including a helicopter.

The meeting portrayed Oli’s contributions to Nepal’s progress in very poor light. Many have begun to raise questions on his ability as Nepal’s Prime Minister.

“The thumping of desks by NCP lawmakers was muted today, which indicated Oli’s performance had deteriorated,” remarked Thapa.

The post Nepal’s Oli Govt in 2018 – Achievements, Failures and Questions Unanswered! appeared first on Nepali Sansar.

The Commerce body criticized the financial authority for abruptly increasing the interest rates, at a meeting with NRB Governor Chiranjibi Nepal.

“The banks have increased interest rates without considering the loan repayment capacity of the debtors, which will directly affect the cost of the ongoing projects while hitting hard the projects that are on pipeline,” reads FNCCI press statement.

The private sector has also demanded that NRB implement the following:

• Reduce the spread rate to 3 percent from the existing rate of 4.5 percent
• Reduce the threshold deposit collection from institutional depositors to 25 percent from 45 percent (of the total deposited amount)
• Creating a strong mechanism for bringing the informal sector’s cash inflow to the formal sector

Currently, firms securing a loan of NPR 500 million and more have to receive a credit rating from the concerned agency and have to pay a commission charge of 0.1 percent for this.

FNCCI has asked the central bank to increase the minimum loan amount to NPR 1 billion and reduce the commission fee.

Additionally, the Commerce authority asked for promotion of e-commerce and waiving the customs duty on Tibet-imported goods in an event when the payment is made through bank drafts, letter of credit or TT.

On the occasion, FNCCI also expressed concern over the government’s slow progress on spending the country’s capital expenditure.

The post Cut Down Interest Rates, FNCCI Tells NRB appeared first on Nepali Sansar.

Three years ago, the budget announcement date was moved from May-end to mid-July giving the government more time for budget endorsement and increasing capital expenditure. 

However, this move has failed with the government unable to bring the expected rise in capital expenditure.

Nepal’s Capital Expenditure

According to Nepal Finance Ministry (MoF) records, the country’s capital expenditure in FY 2015-16, 2016-17 & FY 2017-18 was 59, 66 and 84 percent respectively.

Despite this increase over the last three years, Nepal’s FY 2015-18 capital expenditure remained at an average 69 percent (period when budget announcement date was extended). Before this period, the country recorded an average capital expenditure of 77 percent.

Reasons for Failure

As per the Finance Ministry, inadequate ownership in implementation was responsible for slow capital spending.

“Besides, problems seen in the disbursement process are also among the main causes behind the low capital expenditure,” the Ministry stated in a report submitted to the Parliamentary Finance Committee.

Revenue Secretary Shishir Kumar Dhungana identified delays in land acquisition and delegation of authority as key reasons for failure in proper implementation of the annual budget despite early announcement.

“Lack of proper preparation of the envisioned projects and government agencies demanding inflated budgets not based on actual need and capacity are among the underlying problems,” said Dhungana.

Speaking about Nepal’s capital expenditure this year Dhungana says,

“Although authority has been delegated to local governments to make decisions on a number of development projects, the federal government is yet to come up with clear demarcation of the areas of expenditure.”

The Solution

Despite several attempts in the past including a ‘time-bound action plan’ implemented by the MoF, the country has been unable to enhance its slow capital spending.

Continuing its efforts and coming up with a different solution this time, the Nepal Government has formed a five-member ‘Public Expenditure Review Committee’ under the leadership of Dilli Raj Khanal.

Additionally, it has stipulated a Treasury Single Account system to enhance the budget disbursement pattern.

The Parliamentary Committee has also given the government a budget spending time frame of 60 percent in the second quarter, 30 percent by mid-May and the remaining 10 percent in the last month of the fiscal year.

The post Nepal’s Capital Expenditure Witnesses Slump appeared first on Nepali Sansar.

Nepal’s capex saw a five-year high at Rs 267.25 billion in the FY 2017-18 that ended mid-July 2018, with the last month of the fiscal alone witnessing Rs 108 billion spending.

The government drew wide criticism for its rush spending in the last month!

Responding to remarks over the spending rush, the Finance Minister Yubaraj Khatiwada recently made new statements citing ‘dependence on revenue collection’ as the key reason behind the last-hour spending.

Government’s expenses, mainly capital expenses rise in the last quarter of the fiscal because the payments are issued based on revenue collection. Revenue collection surges only after the first half, says Khatiwada.

He further informed that the budgets for developmental projects were released in the third and last quarters of the fiscal after reviewing the performance of the completed tasks and that doesn’t mean the projects were taken up in the last month.

“Contractors who completed works in the third quarter might have received payments in the last quarter,” he added, while also admitting delays on contractors’ side in executing tasks.

Key Structural Concerns Haunting!
Ending the criticism, Khatiwada noted that the government will soon take necessary measures to address the structural concerns pertaining to budget execution.

In this regard, he highlighted key concerns that are acting as hurdles for the government.

Tax Revenues: According to the minister, timely collection of tax revenues in line with the taxation rules is one major concern delaying the early release of payments from the government’s treasury.

The taxation rules mandate individuals to present 40 percent of the annual income tax estimation by the end of the first half of the fiscal, which decides the surge in governmental revenue for further spending.

Project Preparedness: Another key concern is the lack of preparedness in case of some projects put forth for inclusion in the budget.

Ministries select projects without any preparation. They should know that just announcing projects is not sufficient to implement them. They should at least understand the basics of project implementation, says the Finance Minister.

Need of the Hour
Khatiwada pitches for early addressal of the aforementioned problems to ensure planned budgetary execution.

The minister calls for trimming down the projects that lack early preparedness.

The concept of a project bank must be established, and only matured projects should be included in the budget, says the Ministry of Finance.

He further pitched on the need for development of necessary measures that support project implementation driving planned execution through feasibility studies, environmental impact assessment, legal clearances, among others.

Highlighting lack of inter-agency coordination as another key concern, the minister said budget execution is a collective responsibility of all the related stakeholders followed by strict quality monitoring.

Related Articles:

• Nepal’s Capex at 5-yr-high in FY’18, Delays Continue
• Nepal Federal Budget FY 2019-20: Highlights & Announcements

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