Nepal is getting the second government under the new Constitution. What difference will it make for the business and economy? A lot or not at all? It is tricky to answer the question. Because there are so many uncertainties.And this begins with the fate of the government budget for the current fiscal year that started on mid-July.

Let’s consider one fundamental fact: The new government is being formed after some part of the budget proposals of the ousted Oli government were approved and some other parts rejected by the parliament. The Appropriation Bill that details where and how much the government is going to spend is approved with the help of the Maoist Centre (CPN-MC) though Nepali Congress (NC) opposed it. But the Bills that authorize the government to arrange funds to meet those expenses through taxes and borrowings are rejected with the majority formed by the MC-NC combine. 

What will the new government do now? Will it continue with the same Appropriation Bill? If it does so, it has to reintroduce in the Parliament the same Bills for the taxes and borrowings that the major parties in the new coalition government rejected. If they have to reintroduce the same Bills that they rejected only some weeks ago, how will they explain the logic of rejecting the same Bills earlier? 

This paradox is likely to vex the MC-NC coalition. Some NC leaders have gone on record saying that they want to revise even the expenditure figures. And they do have a strong logic for this. The expenditure figures proposed by Oli government and approved by Parliament clearly show that the current expenditure is going to be higher than the projected revenue, which is a clear violation of fiscal discipline that requires this to be in surplus. However, even the budget of last fiscal year prepared by NC leader Dr. Ram SharanMahat had similar anomaly.  But Dr. Mahat had an excuse as the last year was an abnormal year. However, the current year cannot be regarded as an abnormal year. 

While this debate may go on between the MC and NC for some time and thus cause the uncertainty to continue, the impact on the business sector will certainly be negative.  Only hope is on the common minimum programme that the coalition may bring out to guide the new government if that makes clear statement about how they are resolving this issue. But will they really make this clear in that document? 

Another reason the business is likely to suffer is going to come from the pressure on the government to raise higher revenue than last year. Since the expenditure budget is highly inflated, the projected revenue is already less than the projected current expenditure, and it is not easy to reduce actual expenditure below the projected figure as that will require saving in the populist programmes like subsidies, grants and pensions, the only way out is to collect more and more revenue. So, the new government is compelled to be ruthless in extorting more money as taxes and fees. And the cow to milk that is no other than the business sector. 

Madan Lamsal
madanlamsal@gmail.com