Finance minister Dr. Prakash Saran Mahat presented a lengthy fiscal year 2080/81 budget in the parliament yesterday. The budget summarizes the challenges in the economy but failed to address it. The budget neither has a direction nor a strategy and prioritization to overcome these challenges.
It is simply a collection of the wish lists of different ministries and agencies without even a slight editing. The inclusion of so many programs in the budget raised the size of the budget heavily. The finance minister seems totally forgotten that the budget he is preparing is not at a normal situation but at a challenging time that demands strong prioritization.
In short, it could not even elevate itself in terms of structure and priority from the one presented by the infamous former finance minister Mr. Janardan Sharma who, at least resisted in allocating budget for the parliamentarians.
The finance minister fully understand that the economy is in recession with low economic activities, stagnating investments and high inflation. A low GDP growth contributed by negative growth in manufacturing, construction, mining and quarrying etc, widening trade and current account balance, weak consumption and capital formation as well as revenue collection decelerating putting heavy pressure on budgetary deficit resulting a faster growth in outstanding debt and debt servicing.
Moreover, a not so encouraging international perspective putting pressure for an inward looking policies to encourage domestic agricultural and industrial production for generating employment, increase income and consumption to sustain at least a moderate growth in the economy.
The budget has totally failed to recognize the implications of these challenges and the need for a convincing strategy to overcome.
With these challenges unattended, the budget projected a higher growth of 6.5 % simply to bloat the size of the budget. The revenue projection of 21% increase is simply unattainable. If the revised estimate is adjusted to Rs1050 billion, which is the mostly likely outcome for fiscal 2079/80 the revenue estimate for 2080/81 will be a whopping 36%, too high to achieve by any means.
It is clear that this will further push pressure on the level of deficit to around 6% of GDP, if the expenditures are not slashed down heavily.
The higher level of budgeted expenditure, on the other, is bound to increase imports at a higher rate and may increase current account deficit close to 10% of GDP. This will put foreign currency reserves in a difficult situation and maintain inflation rate at 7%.
To conclude, it is a disappointing budget by a professional finance minister.