This budget will be fully accepted by the coming government

Shanker Prasad Koirala is Minister of Finance, Industry, and Commerce and Supplies since 18 March 2013. With more than 25 years of experience in bureaucracy, he believes that Nepal can achieve double digit economic growth if there is political stability in the country. In an interview with The Corporate’s Janardan Baral, he explains government’s plan of conducting second Constituent Assembly Election and his prospects for an economically prosperous Nepal. Excerpt:

How is the final preparation for the second constituent assembly going on?

This particular government has been formed for carrying out the election successfully and as such the main agenda is election. The required technical, legal and political resources have been met. Similarly, in the latter phase, the government has fully dedicated itself for holding elections peacefully. To achieve its objective it has adopted strict security measures so that citizens can freely go to the election booths and cast their votes.

What is the progress on status of this year’s budget’s objectives? Especially those related to the objective of gaining ecomomic growth and stability.

The government had introduced the budget with the aim of strengthening the country’s economy. Since the initiation of the budget of the current fiscal year, we have been aiming to remove the tag “under developed” from Nepal and declare it a ‘developing’ nation by 2022. We have also introduced the concept paper for the three year action plan and we are balancing long term projects with budget and moving on. In the previous years, our economy’s highlight had always suffered from low economic growth hovering around 2-4 per cent. Since the whole of the economy is focusing on the upcoming CA elections, the development works are likely to be affected. However, due to improvement in certain economic variables, we have planned to raise our economic growth to 5.5 per cent. The International Monetary Fund has projected economic growth to be of 4.5 per cent. I strongly believe that the government is aiming towards the achievement of the stated economic growth. As such, the budget’s main priorities are to focus on making Nepal a load-shedding free country, connecting all 75 districts to road networks and to bring about substantial change in infrastructure development.

Don’t you think there is a high probability of inflation in the economy as you  brought an expansionary budget when the CA elections too are being held?

That is a very relevant question. In comparison to the previous years, the government has not compromised with the investment. As the budget was brought out in time, public expenditure has been carried out since the very beginning of the fiscal year. In the year of elections past savings are brought out and spent. We are well aware of inflation rate and we are trying to minimize it to single digit. According to the statistics provided by NRB, our inflation rate is around 8% and so, I don’t think it will have much effect in the strength of the currency. The country maybe under the pressure of elections and strikes, but it will not weaken the currency.

Probably you say on the basis of the third month’s statistics provided by NRB. But, the impact of election expenditure as well as government expenditure can be seen only in the coming months. In such circumstances, what ways do you suggest to control inflation?

We have tried to control inflation through market monitoring. Concentrating on increasing domestic production may be the solution for the long run. On the other hand, as the exchange rate has stabilized, import should not lead to a rise in the price level.

How are the activities of the current fiscal year being implemented?

This year the budget was announced on time and we expect the same in the coming year. We initiated the budget related work on the first of Shrawan itself. Out of the proposed programmes, only nine are pending approval from the National Planning Commission. We had planned to sign performance based management contract in projects of national pride. Such contracts are signed in all projects except three. Overall, I am satisfied with the progress in development projects.

So, is the progress in programmes of national pride, such as  black coating of mid-hill highway, initiation of east-west railway construction, Nijgadh airport and Melamchi project as per the plan?

Yes, they are are not being carried out as planned. However, in case of West Seti Hydropower Project, construction of second international airport and some other projects,  they are still in the study phase.

What will be the consequences of CA elections in the country’s economy?

CA elections will have a positive impact on the country’s economy. It will kick-start the economic activities in the country. The current expenditure from government is enough to boom the economy. Similarly, the expenditure carried out by the government in elections will be utilized in the country itself in activities like- advertisements, awareness, printing etc. In one way, it is investment in the economy. Similarly, the economy will speed up as the past savings of the citizens and the political parties will flow out in the market.

What kind of economy are you bequething to the upcoming government?

This is a very important subject. As the government was fully oriented towards CA elections, the budget was also independent of idealogies and impartial. The budget incorporated general development programmes of all the parties. Populist and distribution oriented programmes are not included. As such, it is the foundation for the country’s economic uplifting. I firmly believe that this budget will be fully accepted by the upcoming government and its finance minister.

On the other hand, the economic indicators are also satisfactory. Banking sector is also steadily operating. The condition of share market is also strong, as per NEPSE’s indicators. The foreign currency reserve is also comfortable till date. The collection of revenue is also impressive. Though we had predicted the revenue increment to be 19.5% in the current fiscal year, it has reached almost 27% in the first four months. Overall, the economic indicators are positive.