Austerity Measures

Extraordinary times require extraordinary measures. That's how the leaders rise to the challenges. In the wake of catastrophic destruction of infrastructures underpinning the economy, the task of paramount importance is to restore them so that the economy is saved from going downhill. And this is exactly what the government is determined to do. 

In an effort to improve fiscal responsibility and ensure the efficient mobilisation of public funds, the government has rolled out a raft of austerity measures. According to the measures, budgetary support will be assured to the projects that have already received source approval. However, no new, small-scale or redundant projects will receive funding unless they align with the national priority. Likewise, small, fragmented projects that could be better handled by provincial and local governments will not be funded from federal resources. The goal is to cut back on wasteful spending and plug the fiscal gap.  

Additionally, consumer committees have been prohibited from implementing projects of over Rs. 1 million. In a significant change, from now on, regular meeting allowances will not be provided to officials and employees of public bodies for their routine duties, unless they are held outside of office hours for legally established committees. What's more, the accommodation allowance for officials residing in private property has been cut.  

Stricter control has been imposed on the use of consulting services. Funds allocated for work that can be performed by existing staff will not be used to hire external consultants, and conditions under which such services can be sought have been spelled out. In another important move, the government is working to ensure long-term sustainability of government physical structures. We recommend that it also take steps to digitise the stacks of documents, as it acts as a solid backup if paper documents are burned down, as it happened in the recent demonstrations.

The government has also moved to streamline government operations. No new positions will be created unless they are essential technical roles. The newly enacted steps also mandate that all government offices independently manage service expenses on water, electricity, and communication fees more economically. Effort is also being made to eliminate unnecessary structures and positions. Likewise, redundant commissions, such as the Land Problem Settlement Commission, will be eliminated, and structural changes to enhance national security and improve revenue collection are to be made. 

No matter how painful these measures can be in the short term, they must be taken as a bitter pill to swallow – an absolute necessity for the overall economic health. Though the government has only six months to prove its mettle, people have pinned their high hope on Finance Minister Rameshore Khanal, who headed the high-level economic reform commission that five months ago submitted its report to the erstwhile government for concrete economic reform. Known to be a man of principle with an impeccable track record during his tenure as a finance secretary and other capacities, he seems to be the right person to steer the economy so that it successfully navigates the economic storm.   

That said, austerity measures should not deal a crushing blow to vital public services like health, education, and social protection, nor should they disproportionately harm vulnerable populations.   At the same time, the measures should make the private sector, which is the government's tax base and bore the brunt of the recent violent outburst, feel upbeat about the future.