Revenue Boost Vital

Nepal is now striving to come out of the ongoing recession caused by the external and internal factors. Soaring inflation, dwindling foreign currency reserve, widening trade deficit and low development spending are some glaring economic woes roiling the nation. The government has formulated budgetary, financial and monetary policies in a way that enables it to bring economy back on track. The new fiscal year budget targets to achieve 6 per cent growth and keep inflation within 6.5 per cent. It is geared towards building a robust, sustainable and resilient economy through the promotion of competitive and profitable industries, and development of digital and green economy. It seeks to involve the youths in the productive economic activities within the country, protect public assets and effectively utilise the available resources. The government can achieve prosperity, good governance and social justice only if the programmes and policy outlined in the budget are effectively implemented.

There is the need for balancing the income and expenditure to achieve the stated goals of the budget.  Failure to collect revenues as expected will have direct impact on the spending targets and competency, leading to the budget deficit, with an increase in internal and external borrowings.  Moreover, the success of budget largely lies in the ability to spend the capital expenditure. Low spending slows down the pace of infrastructure development and employment generation. Unfortunately, poor capital spending has been a chronic economic malaise in Nepal for decades.  Likewise, negligible amount of export items and growing import has made it prone to the external shocks. Consequently, the economy has become import based, with negative consequences for growth and development. This scenario has emerged despite several measures to increase export and decrease import. 

A news report published in this daily presents a challenging scenario with regard to the revenue collection and capital expenditure, which have shrunken in the last fiscal year 2022/23 compared to the previous corresponding year. The government has collected revenue of Rs. 957.15 billion, a drop by 9.66 per cent (Rs. 102.38 billion) against the previous fiscal year. It was 68.21 per cent of the annual target of Rs. 1,403.14 billion. In the fiscal year 2021/22, the government raised Rs. 1,059.53 billion in revenue. During the last fiscal year, around Rs. 21.2 billion had been received as grant and Rs. 53.2 billion as other receipts. In the previous fiscal year 2021/22, the government received Rs. 18.18 billion as grant and another Rs. 48 billion as other receipts. 

Likewise, the budget deficit hit about Rs. 400 billion in the last fiscal year. The government had collected revenue of Rs. 957.15 billion, grants of Rs. 21.29 billion and other receipts of Rs. 53.24 billion. But, annual expenses crossed Rs. 1,429.5 billion against income of Rs. 1,031.69 billion. On the other hand, the capital expenditure is only 61.44 per cent of the total allocation by July 16, 2023. This is the first time that the revenue is not going to cover even the recurrent expenses this year. Import restriction measures, imposed to improve the foreign currency reserves, have contracted the revenue income. The government should focus on spending capital budget, bring flexible monetary policy to attract the private sector's credit and ease the import trade. It is also essential to reduce import and increase export to slash the widening trade deficit. If the government lags to take stringent steps to this end, the economy may continue on the downward path.