KATHMANDU, April 27: National Planning Commission (NPC) member Dr Sanjay Acharya has said the budget for the upcoming Fiscal Year (FY) will lay the foundation for long-term improvement on the basis of good governance and create the groundwork for projects, programmes and policy reforms that will generate multiplier effects in the national economy.
Dr Acharya was speaking in a discussion programme on the budget for the upcoming Fiscal Year 2026/27 here on April 24. The event was organised by the Management Association of Nepal (MAN).
"The general public has high hopes and expectations from the current government, but one should not expect that all problems can be solved with a single budget, as existing problems were not created overnight," he said, adding that the NPC will change the methods and procedures for equalisation and special grants, as well as encourage provincial and local governments to become self-reliant in terms of resources.
Acharya pointed out the need for improvements as, compared to wages, labour productivity in Nepal is low, and the high costs of transportation and logistics in trade have been discouraging direct foreign investment.
He said the government should listen to the private sector, which contributes 80 percent to the economy and 85 percent to employment, and treat it with respect.
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Dr Acharya also discussed that the idea of reducing tax rates and expanding the tax base has been in practice worldwide since the 1980s. He emphasised that if a system of voluntary tax payment through reasonable taxation can be developed, coverage will expand, stating that studies will determine what the maximum threshold of a tax should be to achieve the highest tax collection.
The NPC member also stated that the government should pay attention in this regard, given that Nepal has not been able to benefit from climate-related 'global funds' in an equitable manner from the perspective of climate justice.
Former Finance Minister Dr Yuba Raj Khatiwada advised the government to change the existing 'rule of thumb' formula for royalties, as well as the formulas for equalisation and special grants.
He stated that the public-private partnership model would only be effective if the private sector abandoned the mindset of taking no risks, as it allows the private sector and the government to work on infrastructure development by sharing profits and risks.
Former Chief Secretary Dr Baikuntha Aryal, while presenting a working paper, underlined that production, employment and investment growth should be the main priorities of the budget and highlighted the need to enhance allocation efficiency and the capacity of implementing agencies through improvements in the budgeting system. He also mentioned that there should be performance-based incentives and effective monitoring.
"To solve the problem of reallocation, one can also opt for 'agency budgeting', which allows spending under any heading within an overall project, rather than a 'line item budget'," he suggested.
Dr Aryal said that under the social security programme, the government could arrange to directly pay health insurance coverage equivalent to 10 to 11 months of allowance and one to two months of insurance premium.
On the occasion, commentator Dr Ramesh Chandra Poudel stated that 'digitalisation' would play an important role in good governance.
Former president of the Institute of Chartered Accountants of Nepal, Sudarshan Raj Pandey, said that currently only 17 to 20 percent of the total budget is allocated for the capital budget, and even within that, actual expenditure is low, leading to weak capital formation.
Deepak Malhotra, Senior Vice President of the Nepal Chamber of Commerce, said that it is necessary to activate sectors such as real estate and construction in a situation where overall demand in the economy is weakening, emphasising that multiple VAT rates should be maintained.
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