Fical Policy Of Nepal 2018
नेपालको वित्तीय नीती २०१८
The
previous economic growth rate of Nepal’s economy was around 7% and was seen as
a sign of progress. Economist and government have predicted similar growth
rate. Government is optimistic about two-digit growth rate. I’m not sure what
government is thinking, but based on the prediction of economic growth rate
government has increased tax rate for corporate, import, personal income, and
almost everything.
The
current fiscal policy is one of the riskiest policy ever made in Nepal. The
government has a huge expectation and is planning to bring some real change
with development activities. But with a hike in tax in almost every sector
including income tax, the current fiscal policy poses a huge risk to Nepalese
economy.
If
Nepal’s economy is able two achieve two-digit growth rate, current tax rate
increase can be justified; however, if it fails to do so, inflation of two
digits is imminent. The tax increase can be seen as a roadblock to economic
growth rate — can even result in negative
growth rate. With the increase in import tariffs, the government is hoping to
control trade deficit, however, due to lack of home-made alternative,
I cannot assume much affect in import.
The
finance mister (Former governor of Central Bank) has boldly claimed that the
current fiscal policy is the best one. While the result would be unnoticeable
for two years, he is pretty much sure we will be seeing economic boom after 2nd
year.
The
government is trying to achieve best, however, the fiscal policy is also the riskiest one.
·
If Nepal is not able to achieve growth rate as predicted, inflation will go up.
Don’t be surprised if it hits two digits.
·
The government has a plan for tons of development projects including metro
rail, hydro projects, ship, highway and train tracks. If the government isn’t
able to commence these projects, the problem of deflation may arise.
·
Low growth rate and high government expenditure can result in a state of
stagnation, causing high unemployment, inflation, and low economic growth rate.
This can be considered as the worst case scenario.
It
seems like government tried to achieve too much too soon in short time, risking
the economy. The tax rise will mostly affect small and medium industries. The
only supporting pillars of these changes (and Nepalese economy) is remittance;
the flow of remittance might facilitate these changes to some extent. By not
increasing the budget for social security and subsidies government has somewhat
tried to implement some damage control. Since the newly merged communist party
and alliance have a majority, the government is expected to be stable and there
would be a lesser roadblock. Also, it is expected to ease decision making and
implementation process.
Considering
the fact that current finance minister is expert on Nepali economy let see how
things will go. Hopefully, we will be able to see a change after two years. It
would be a miracle and extraordinary feat if the government is able to do a
thing right this year. Negative growth is imminent and shouldn't come as a
surprise.
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