The Federal Budget for the upcoming fiscal year is expected to be different from the past years as the budgetary priorities and programmes will be directed towards addressing the impact of COVID-19 on Nepal’s economy and jumpstarting the recovery process.
The COVID-19 pandemic has thrown Nepal’s economy into a quagmire which was already slowing before the start of the global outbreak of the virus. Most of the economic sectors have gone into deep freeze due to the month-long restrictions in the movement of people. The current need for the government is to focus on taking the country out from the slump whilst also investing significantly on strengthening public health to address the challenges presented by the coronavirus outbreak. As economic recovery has become the topmost priority, the government is not in a position to announce or invest in large infrastructure projects which can be considered appropriate in times like these. It will be advantageous if the budget is allocated for the completion of projects that have already been awarded to developers.
Comprehensive fiscal and monetary stimulus packages are the need of the hour. The Federal Budget for the upcoming fiscal year must incorporate full-fledged stimulus measures that can pave the way for a faster revival of the disease-stricken economy as the pandemic subsides. At a time when private sector companies have even become unable to pay salaries to their staff due to the abrupt halt in business, the topmost priority of the budget should be rescuing such businesses that are on the verge of collapse. The pandemic-induced crisis has left no businesses unscathed. Travel and tourism related businesses such as hotels and airlines, that have billions of rupees in investment, are bleeding cash with no business at all. Similarly, manufacturing businesses are also struggling to survive. Small and medium enterprises (SMEs) have taken a massive hit from the lockdown. Nepal’s international trade has also been badly affected as the restrictive measures to contain the coronavirus have disrupted supply chains to a great degree. The closure of businesses and severe disturbances in the country’s international trade have not only caused revenue loss to the government, but, more importantly, the jobs and livelihoods of millions of people are in jeopardy. The loss of jobs of migrant workers and other Nepalis living abroad is another major fallout of the pandemic for Nepal. Offsetting the sharp decline in remittance inflow and providing employment opportunities to an estimated one million, who are expected to return to Nepal from various countries after the travel restrictions are eased, will indeed be herculean undertakings.
The government should not hesitate to introduce austerity measures in the new Federal Budget. Slashing unnecessary expenses will help to conserve the important financial resources in a time of crisis, while it can also pave the way towards maintaining a good level of the long sought-after fiscal discipline in the country. The government should follow the example of the Indian government which has suspended the constituency development fund for the next two years. Given the significant erosion of the taxpaying capacity of businesses and citizens due to the loss of income, the government needs to take a different approach in taxation. The tax net should be widened plausibly avoiding increase of burden on taxpayers. The upcoming Federal Budget should address the challenges the pandemic has brought to food security in Nepal, which became evident during the lockdown. Formulating and implementing policies to expedite the commercialisation of agriculture can be an important step in this regard. It will also be instrumental to create new jobs and provide employment opportunities to jobless youths of the country.
It requires diligence and insightfulness to tackle the challenges that have surfaced because of the COVID-19 pandemic. The current crisis is a test for the lawmakers and the people in the government to steer the country away from an economic disaster.