While some economists have suggested the government to come up with budget smaller in size for the upcoming fiscal year citing sharp economic contraction, the Finance Committee of the Federal Parliament has recommended that the budget should be sized according to the ceiling set by the National Planning Commission (NPC). NPC had set the ceiling of the budget for FY2020/21 at Rs 1.7 trillion before the start of the pandemic-induced crisis. In a report prepared by the committee after the pre-budget discussion, the parliamentary panel has suggested the finance ministry to set the size of the budget at 45 percent of the estimated gross domestic product (GDP) of the country. The report has incorporated 13 sector-wise suggestions related to the budgetary preparation for the upcoming fiscal year. According to the committee, the government needs to address the covid-19 impacted sectors through policy level, monetary and economic relief packages.
The report concluded that the government needs to announce stimulus package equivalent to 5 percent of Nepal’s GDP, or Rs 188 billion, to restart the country’s economic engine. The house panel has suggested that the budget needs to prioritise areas including prevention and control of coronavirus, health infrastructure enhancement and development, modernisation and commercialisation of agriculture, industrialisation and transformation, productive employment and labour management. Other priority areas in the budget should be revival and promotion of cottage, small, medium and large-scale industries, and continuation of relief management and development programmes, according to the report. “All local levels need to allocate 10 percent of their budget for health infrastructure development coordinating with provincial and federal levels for prevention and control coronavirus and treatment of Covid-19 patients,” the report stated.
The committee has suggested the government to allocate 15 percent of the federal budget for development of agriculture, animal husbandry, irrigation and agricultural roads. Besides, it also suggested providing at least 50 percent subsidy to farmers for the purchase of agricultural equipment and fixing of the minimum support prices of major crops before plantation.
The report has suggested establishing industry promotion centres in all seven provinces and providing tax concessions to industries to boost industrial productivity, exports and employment generation. The report has asked the government and private sector enterprises to bear one-third each of the salaries of the jobless workers. “Businesses such as hotels, restaurants, travel firms and transport companies that have become most affected by the measures taken to fight Covid-19 should be provided relief and concessions,” the report said. According to the report, the finance ministry needs to set Rs 1 trillion revenue target for the upcoming fiscal year without increasing tax rates. It has suggested mobilization of Rs 1 trillion in bilateral and mutilateral foreign aid while also recommending raising internal loans equivalent to 6 percent of GDP.