KATHMANDU, July 3: Various measures adopted by the government for the revival and advancement of the economy are starting to show positive results. Within 100 days of the formation of the government led by the Rastriya Swatantra Party (RSP), approved by the electorate, improvements in revenue collection and overall promising changes in the economy have been observed.
Trust in the private sector has been growing, investment is expanding, and even donors' confidence has increased. The government, which has received two-thirds of public support, has created an investment-friendly environment.
Following the demands of the private sector, it has moved forward with the process of repealing more than a dozen outdated and impractical laws. Trust has further increased due to actions like abolishing unnecessary and impractical offices and making improvements in tax laws.
On March 27, Finance Minister Dr. Swarnim Wagle took office and expressed his commitment to taking concrete steps for the country's economic recovery and good governance. He had decided to start the process of repealing 15 old laws that were deemed unfriendly to the private sector and ordinary citizens. He said that this decision was made based on the high-level economic reform suggestion report and recommendations from various business organizations.
Based on the roadmap he presented on the day of assuming office, the Ministry of Finance has effectively carried forward its activities.
The dream of a 10 trillion economy
The current government led by Prime Minister Balendra Shah has focused most on one important issue in the meantime: a 10 trillion rupees economy. Finance Minister Dr. Wagle has also given it priority. Believing that the size of the economy needs to increase significantly for the country's economic progress, the government has been pushing forward its activities. This topic was even mentioned in the manifesto presented by the RSP during the House of Representatives election held on March 5.
The Finance Minister has repeatedly emphasized that the economy will be expanded by boosting energy production, tourism, ICT, agriculture, infrastructure, and institutional reforms, and work has already started in a ‘mission mode’ for this. The upcoming fiscal year's budget has also been focused accordingly. The RSP's election manifesto had presented an ambitious plan to increase Nepal's economy to over 100 billion dollars within the next five to seven years. The budget released by the government on May 29 reflects the same policy.
The manifesto aims to achieve an annual economic growth of at least 7% at constant prices and to raise Nepal's per capita income to 3,000 dollars within 5 to 7 years. According to the World Bank standards, Nepal is a low-income country. The goal is to reach a respectable middle-income country level in the next 5 years.
The government has given high priority to good governance and service delivery. The concept of 'not line but online' has been applied to government services. The commitment to implementing meritocracy and building a party-free state mechanism has been put into practice. Dozens of acts and regulations that were considered obstacles to economic growth have been repealed at once, creating a favorable investment environment for the private sector.
Will Nepal’s economy hit Rs 150 trillion mark?
In the upcoming fiscal year's budget, the government has set five priorities. The government's first priority is good governance. Second is the revival of the economy. Third is internal and external connectivity in the country. Similarly, the fourth priority is social investment, and the fifth is the expansion of soft power through tourism, culture, and history. This has been highlighted in the budget.
Since political stability has been achieved, the government believes that honestly moving the country forward will pave the way for economic progress. The impacts of the war in the Middle East on remittances, petroleum products, and chemical fertilizers, including short-term, medium-term, and long-term impacts, have been analyzed and addressed. Public holidays on Saturday and Sunday have been given for this purpose.
The internal economic slowdown, unemployment, and sluggish economic growth have been addressed. The 'drought' in revenue collection and spending, as well as the situation where the private sector couldn’t take loans despite rising bank liquidity, have gradually been moving towards improvement.
Citizen participation in budget formulation
This time, the government launched a portal to collect suggestions with the aim of directly involving citizens in budget-making. The Office of the Prime Minister and Council of Ministers has brought a suggestion collection portal to ensure direct participation of the general public in the process of formulating policies, programmes, and the budget for the upcoming fiscal year.
This digital platform was started to make the governance system more transparent and people-centered, while incorporating the real needs and fundamental expectations of the public into the government’s annual policies, programs, and budget.
Through that portal, citizens, experts, and policymakers both inside and outside the country gave their important opinions and suggestions regarding budget-making and development priorities. The portal helped bridge the gap between citizens and the state, establishing a new practice of good governance, and the suggestions received were seriously reviewed at the administrative level and implemented in a policy-based manner.
Finance Minister's 'Mission Mode'
Finance Minister Dr. Wagle has moved forward on the 'Mission Mode' work, meaning giving priority to work and results. Instead of focusing on speeches, the style of governance has been changed to achieve economic goals within the set timeframe. Traditional practices have been broken. Digital tracking, direct monitoring, and strict legal reforms have been implemented.
The main feature of this is a results-oriented approach. It is aimed at producing outcomes rather than being limited to speeches or superficial plans. Timeframes and performance indicators are being used.
A system has been set up to directly track the progress of projects and policy implementation through digital monitoring. Policy obstacles have been removed to boost the morale of the private sector and attract investment through legal and institutional reforms.
Institutional accountability has been established. Spending is being controlled, and quality maintained. There is a system in place to cut unnecessary administrative expenses, gradually phase out retail programmes, and implement programmes only through open competition.
The goal is to shift the economy from being remittance-and import-based to being driven by production, innovation, and entrepreneurship. Its impact on the economy and the private sector's expectations is gradually creating a reliable environment. Tax cuts and policy ease have been maintained to raise the previously low business morale and generate demand that was stagnant in the market.
Efforts have been made to boost the economy by prioritizing agriculture, energy, infrastructure development, and digital governance.
Budget's goal to expand the middle class
Finance Minister Wagle presented a budget of Rs 2.114 trillion for the upcoming fiscal year with the goal of expanding the middle class and uplifting the weaker sections. Special priority has been given to Karnali and Sudurpaschim provinces in the budget.
Out of the total allocation, Rs 1 trillion 270 billion 580 million is allocated for current expenses, Rs 431 billion 100 million for capital expenditure, and Rs 422 billion 640 million for financial management.
Among the sources estimated to cover the expenses for the upcoming fiscal year, Rs 1 trillion 405 billion 310 million will come from revenue and Rs 61 billion 740 million from foreign grants, leaving a gap of Rs 657 billion 290 million. To cover this, Rs 247 billion 280 million will be mobilized from foreign loans.
The remaining Rs 410 billion shortfall from revenue and foreign aid mobilization will be raised through domestic loans. The Finance Minister is confident that the policy reform programmes announced in the budget will bring about 7 percent economic growth. Likewise, inflation is expected to remain within 6 percent.
The tax rates have been reviewed to stimulate the overall economy by supporting entrepreneurship and expanding the middle class. The limit for income tax exemption has been doubled, allowing individuals to pay only one percent tax up to 1 million. The maximum rate of personal income tax has been reduced by 10 percent. The budget emphasizes infrastructure expansion. Focus has been placed on policy reforms for the development of energy, road infrastructure, and sustainable economic growth.
Economic diplomacy and investment promotion
The Ministry of Finance has also actively pushed forward intensive economic diplomacy. Efforts have begun to attract foreign investment to Nepal, involving commitments to investment protection, in discussions with representatives from the private sector and well-known multinational companies.
The Finance Minister addressed virtually as the keynote speaker at the United Nations Economic and Social Council's ministerial session on financing for development held in New York, USA, and at 'The Nepal Discourse' organized by Harvard University and the Massachusetts Institute of Technology.
An agreement has been moved forward, in principle, with the process regarding the grant assistance of 28.5 billion Japanese yen for the improvement of Tribhuvan International Airport. In the Investment Board's monitoring and facilitation meeting, necessary suggestions were received to resolve issues related to forestry and the environment seen in the implementation of projects under the board. The report from the committee formed to provide suggestions for the restructuring of Nepal Stock Exchange Limited has been received and has been implemented since 2082 BS.
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