Rejuvenating The Quake-hit Economy: Kushal Pokharel
As the government braces to present the budget for the next fiscal year, there is an uphill task ahead to balance two crucial aspects of economic transformation: rebuilding the quake-ravaged economy and fostering economic growth. This, in turn, calls for a pragmmatic budget that can achieve these goals. However, going by the historical trend, there is less to rejoice for the citizenry as previous budgets have laid out ambitious reform packages on paper but failed to put most of them into practice.
In the aftermath of the deadly April 25 earthquake, Nepal is facing unprecedented challenges in the process of reconstruction and rehabilitation. With the GDP growth plunging to an eight-year low of 3.04 per cent, the path towards rebuilding the nation is strewn with uncertainty. Similarly, the Post Disaster Needs Assessment (PDNA) report of the National Planning Commission (NPC) paints a gloomy picture of the nation, suggesting that the quake has damaged infrastructure and business worth Rs 700 billion and the country needs Rs. 666 billion for reconstruction.
Amid this scenario, the government has raised the budget ceiling by 106 billion. Prior to the earthquake, the ceiling was set at Rs. 735 billion, which was later increased to 841 billion. The recently announced government policies and programmes have also accorded top priority to the reconstruction of the damaged infrastructure. Although it is welcoming, it doesn’t ensure the effective implementation of the policies and programmes spelled out on paper.
While the big earthquake ushered socio-economic transformation in Pakistan, it aggravated the problems in Haiti. This is to say that not every post disaster effort will turn into an opportunity. What determines the path of the nation is the leadership of the country.
Against this backdrop, the incumbent finance minister has a golden opportunity to rise to the occasion. Since he has proved his dynamic leadership in ushering neo-liberal economic reforms in the country after 1990, it would not be wise to belittle him. However, it is really important for his team to show unflinching commitment thereby ensuring effective implementation of the development programmes to rebuild the nation.
The government’s capacity to mobilise the capital expenditure has become a matter of grave concern for the general people as well as the donor community for a long time. Thus, it is significant to adopt a fast-track approach to expedite reconstruction activities. This is possible through the establishment of a Reconstruction Authority which the government has already decided to form. With key appointments remaining to be made, the authority hasn’t got full shape.
It is important for the government to form a team of visionary experts and provide autonomy in the day to day affairs of the authority as soon as possible. Appointing the key members of the authority based on merit should be a priority to lead post-disaster socio-economic recovery and reconstruction.
Continuing the legacy of presenting the annual policies and programmes before the budget, the government recently made it public. The president on behalf of the government read out the document in the legislature parliament. With ambitious goals like reducing power cuts to 8 hours during the dry season, the implementation aspect looks still shaky as it fails to lay out the concrete course of actions to deliver it.
Although the programme seeks the active role of the private sector in spurring economic growth in the country by creating employment opportunities, it hasn’t brought any substantial package to lure the private sector. To put simply, the demand of the business community to involve them in the national reconstruction endeavours remains neglected. Having said that, there is an indication of applying a performance-based incentive system in national pride projects.
Investing in the reconstruction of the world heritage sites to promote tourism in Nepal must be the top agenda of the government amidst the scenario of rampant damage of historic temples and cultural heritage by the earthquake.
Similarly, agriculture being the mainstay of the Nepalese economy, should be prioritised. Providing concessional loans and increase subsidy in agriculture will motivate the local youths and farmers to engage in this occupation.
Embracing the public-private partnership model will be a boon to work collectively for rebuilding the nation. The government’s fiscal policy should clearly state the strategies to foster collaboration between the public and the private sector in key areas like education, health, communication and energy.
Focus on Mega Projects
Emphasis on the timely completion of mega projects to boost the national economy promotes mass welfare. It would be unwise to shift attention from these projects citing the earthquake scenario. In fact, only 14 districts have been devastated and others remain largely unaffected. Projects of national significance like the Fast Track, Melamchi Drinking Water and Mid-Hills project require acceleration to change the socio-economic condition of the people.
Notwithstanding the fact that the budget must encompass various sectors of the economy, the key to its success is effective implementation. No matter how well the plans are formulated, if it can’t be translated into action, it is futile. Therefore, the stiff challenge for the government is to break the vicious cycle of poor implementation.