Budget blues: Ambitious plans execution doubts – Part 2
As tourism is an integral part of the Nepalese economy, the reconstruction and revival of damaged tourist destinations are bound to receive preference over others, which could potentially overshadow other touristic developments.
Besides the plans expected to be carried out in the Reconstruction, Agriculture and Infrastructure, sectors such as Tourism, Education, and Health have also been addressed with hopes of revival, improved access and quality assurance. In addition, deficit financing has also been used to meet the budgetary requirements, as has been the case for a long time.
The tourism sector was severely hit by the earthquake. As a result, the budget emphasizes the revival of the tourism industry through development, marketing and accessibility of touristic goods, along with the implementation of a National Tourism Action Plan aimed at making tourism a dominant contributor to the economy. For this purpose, a total of NPR 1.1 billion has been allocated towards developing tourism infrastructure and promotional activities. Besides these, certain tax exemptions have also been provided, especially to entrepreneurs operating around Karnali region including areas surrounding Rara Lake.
With NPR 98.64 billion allocated to this sector and despite covering 12% of the total budget, most programs are a continuation of previous scholarships, teacher benefits and midday lunch programs. Given these past schemes, however, the primary school enrollment has continuously been decreasing the past few years; whereas the number of teachers has been on the rise (which may not be a bad thing, per se, but adds to the growing expenses in teacher benefits without concrete returns). Similarly, although secondary enrollments have increased, the quality of education still remains questionable especially given the decreasing SLC pass percentage. Therefore, there is a need to expand education access along with ensuring quality. The current budget with its meager plans in education does attempt to address these issues through provisions such as free basic education, the establishment of residential schools with modern facilities, and introducing internet-based learning; however, there is still a need to give in-depth focus on this sector with increased introduction and implementation of effective schemes.
In health, a total allocation of NPR 41.3 billion has been made where public health services and hospital services account for the major chunk of the expenditure. Regarding this, a new scheme in the public health domain includes “One village One Doctor” where gradual implementations will be made to ensure at least one doctor in every health organization. Necessary provisions also have been made in the establishment of a hospital along with satellite hospital services as well as two trauma centers, and improved infrastructure, tools, and equipment in all hospitals and health posts. However, mental illness still remains largely ignored, especially in the context of the earthquake where cases of psychological trauma have risen sharply.
Out of the total budget of NPR 819.46 billion, NPR 484.26 billion or 59.1% comprises of current expenditure, NPR 208.87 billion or 25.5% for capital expenditure and NPR 126.32 billion or 15.4% for financial management. As with previous budgets, the government has adopted deficit financing where revenue sources, principal repayments and foreign grants cover roughly 72% of the total budget and the rest 28% has been managed through foreign loans, domestic borrowing and cash balance. Although deficit financing aids development, higher deficits is often said to cause macroeconomic instability as there is an increased money supply which lowers the money value often resulting in inflationary tendencies. In addition, deficit financing also puts strain on the debt burden, which if unmanaged could lead to growth inefficiencies.
As tourism is an integral part of the Nepalese economy, the reconstruction and revival of damaged tourist destinations are bound to receive preference over others, which could potentially overshadow other touristic developments. In such cases, the government should be wary about the long-term implications and opportunity costs as some of the reconstructions could span over a long period of time. In the context of education, its returns are obtained in the long run – where adequate allocations in raising educational quality standards are vital if it is to tackle the lingering adverse lack of skilled human resources. Finally, with respect to the practice of deficit financing, the persistent dependence on deficit financing which, unfortunately, has not been accompanied by stable growth portrays a disappointing forecast of increasing debt burden. The presence of such circumstances would certainly affect the development trajectory as the expenditures would be compromised towards debt servicing as opposed to investments.