'Special' budget

It is a misnomer to call it a special budget. A substitute budget, under which the government can spend the equivalent of one-third of the actual spending that has taken place in the soon-to-end fiscal year but cannot make any policy or tax changes, should in fact be called an ‘inferior budget’. That phrase would also accurately depict the political environment that has led to a situation where presenting a full-fledged budget has become impossible and we have to make do with this stopgap measure. The fact that the government has had to resort to Article 96(A) of the Interim Constitution to bring in this partial budget so that the state’s finances do not become paralyzed only indicates how our current political set up is becoming increasingly dysfunctional. This is the second time within three years that the Finance Ministry has come up with a ‘special’ budget.



Failure to come up with a full budget on time harms the economy in many ways. The budget is not just a statement of the government’s estimated income and expenditure. It’s more about the policies and programs through which the government intends to change the social and economic direction of our country. For an evolving and dynamic society, especially one with a need for rapid socio-economic adjustments, the budget is a very important instrument of change. Sadly, the state will have to keep this instrument in refrigeration for some more weeks, possibly even months.



Taxation is another area when the absence of timely adjustments that will distort the economy. The partial budget cannot propose tax changes, so the tax rates will remain the same until the formation of another government and the unveiling of the new budget. Generally speaking, adjustments in tax rates accrue additional income to the government every year, but now the state coffers will have to forgo this increment until the new budget. Taxation is also an instrument that is used in encouraging/discouraging spending and investment in various sectors. But even that function is now on hold.



The psychological impact of failing to bring a full budget on time will be even more devastating for the larger economy. As much as it affects the state’s capacity to mobilize revenue and execute ongoing policies and programs, it also encourages tax payers and investors to withhold decision-making, thus placing an already battered economy on the back foot. Though Nepal’s per capita income has risen to US$ 562, thanks to remittance inflow and other fund transfers, the economy as a whole is in the red, with low saving and low investment. At this rate of investment, we won’t be able to bring meaningful change in people’s lives in the foreseeable future. An economy neglected for too long will come back to impact politics with a vengeance, a prospect that politicians can neglect only at their own peril.

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