Arrangements in Budget Inadequate to Revive Economic Activities: Private Sector
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The government has dashed the hopes of the country’s private sector that a comprehensive stimulus package will be announced in the Federal Budget for FY2020/21 to kick-start the economic recovery. Industrialists and businesspersons say that the measures announced in the budget haven't offered substantial relief to the crisis-stricken private sector and that many of their demands have gone unaddressed.
The government has announced establishment of two refinancing funds totaling Rs 150 billion. As per the arrangements, Nepal Rastra Bank will provide refinancing facility of Rs 100 billion. Separately, a Rs 50 billion refinancing fund will be established with money received from the government, state-owned enterprises.
Both funds will provide concessional loans to businesses to restart their activities and pay salaries to their employees. According to the arrangements in the budget, businesses in agriculture, cottage industries, small and medium enterprises (SMEs), manufacturing industries, hotels and tourism sector enterprises can avail credit from the fund at 5 percent interest rate.
“These are only basic reliefs for the private sector. We had suggested the government to bring stimulus package worth 5 percent of the country’s GDP. The measures announced in the budget are 4 percent of GDP,” Said Bhawani Rana, president of Federation of Nepalese Chamber of Commerce and Industry (FNCCI). “There are not many things in the budget to encourage the private sector. However, arrangement for refinancing, programmes to support MSMEs, reduction in demand charge of electricity, income tax concession for tourism sector are positive steps,” she added. Rana said that it has become challenging for the crisis-stricken businesses to move ahead in the coming days due to lack of clarity in mobilization of capital and relief packages.
Rajendra Malla, senior vice president of Nepal Chamber of Commerce (NCC) said that the budget is overall positive for the private sector. “The increase of budget allocation for public health is very timely. However, the Ministry of Finance has not given its attention to the revenue target and whether or not the government can manage its expenses at present. The revenues sources have shrunken significantly at the moment,” he opined. According to Malla, the government, which has prioritised agriculture sector development in the Federal Budget for FY2020/21, has not given preference to internal logistic and transportation due to which production of goods will remain costlier.
Dhruva Thapa, president of Cement Manufacturers’ Association, Nepal (CMAN) said the the arrangements in the budget are ‘traditional’ except for the health sector development. He stated continuation of consituency development fund and failure to bring budget on the basis of priority even at this time of crisis as dejected. “There are concerns how all industrialists and business persons can avail the refinancing facilities. The success of the government’s announcement depends on how the arrangements in the budget are implemented,” he said.