It has been over one and a half years since coronavirus broke out in Nepal. The government imposed prohibitory orders and lockdowns for months that not only restricted the movement of people but also halted economic activities across the country. As businesses remained closed for a long time, many people either lost their jobs or experienced a significant decline in their earnings. Almost everyone felt the financial pinch. Individuals and families pleaded for financial support from the government in order to pay for food, housing and bills. The government's response was disappointing. It largely ignored such pleas.
While the government introduced some forms of relief like loan repayment moratoriums and cheaper loans, they did not immediately help those like daily wage earners who lost their livelihoods and struggled to put food on the table. For many, such measures did little to relieve their financial hardships.
Now, the government is distributing cash to such families. Introduced through the budget for the current fiscal year 2021/22 by Minister of Finance Janardan Sharma, the government is now handing out Rs 10,000 in cash to each family hit severely by Covid-19. The government plans to distribute Rs 10,000 to half a million families under the scheme.
However, the government's handout plan is misguided not only because it fails to meet its purpose to provide an adequate relief to the families hit by the pandemic at this moment, but also breaches financial discipline.
The cash distribution decision could have been justified if it was done when the country was under a strict lockdown to combat the pandemic and families or individuals were suffering severe financial hardship. That is not to suggest that those who have lost their livelihoods, jobs or income are not suffering anymore. Of course, they are. But, the situation is now improving as Covid-19 cases are subsiding. Economic activities are now gaining in momentum--albeit slowly. Now is the time when the government should support the recovery through various measures for the revival of businesses and firms through stimulus packages like tax breaks and cheaper loans and by creating an enabling environment to do business. That would help create employment opportunities.
The government has not been able to make progress on capital expenditure and now, instead, it is focusing on spending that results in little capital formation, if at all. Cash distribution of Rs 10,000 to 500,000 families would cost Rs 5 billion. The fact is, there is not enough internal revenue to even meet recurring or administrative costs and the spending plan comes at a time when the government is under pressure to manage resources. While the government scrambles to arrange resources for development projects, the cash handouts in addition to other distributive programmes like increased elderly allowances that are already in the previous budget will only exacerbate the pressure on resource management.
Government handouts are not the only way to provide relief to the most vulnerable. But, the government chose the easiest way of doling out cash. It also has other drawbacks. Like in other cash distribution programmes, it could be misused. The decision of cash handouts has been criticised as being a populist programme to attract voters and enrich party cadres. Since there is no record or database of the poor families, there is a real chance that the cash support could end up in the hands of those other than the targeted beneficiaries. That is how they prefer to nurture their cadres and sustain their political base.
There has always been a competition among political parties to announce and distribute handouts.
Distributive programmes become the only yardstick by which to measure their performance in the government, not their plan or performance on boosting development works and national production. It should be the other way round.