Govt to bring Rs 384.90b budget

KATHMANDU, July 13: The government will unveil an ambitious budget of about Rs 384.90 billion for fiscal year 2011/12 that will see a sharp rise in the recurrent expenditure fuelled mainly by a hefty 24.81 percent pay-rise of civil servants.

The proposed salary-hike that has escalated the recurrent expenditure to Rs 210 billion, a 10 percent rise over this year´s allocation, is being announced after deferring it for two years.


Likewise, the government is earmarking Rs 148 billion for capital budget, meaning the government will allocating Rs 19 billion more for financing development works than it was available in the current year. It has also set aside Rs 26 billion for repayment of loans that are maturing in the new fiscal year.

For financing the expenditure, the government is aiming to mobilize revenue worth Rs 247 billion, which is 14 percent more than the target set for the current year. However, given the fact that the Ministry of Finance is estimating actual collections to be around Rs 206 billion, which is short of target by Rs 10 billion, the revenue target set for the new fiscal year is well above 20 percent, said a source.

It is also aiming to mobilize around Rs 75 billion in foreign grants -- higher than this year´s target of Rs 65.34 billion. Officials say the target is ambitious as Nepal has failed to realize grants as targeted this year. Despite all these ambitious targets, the budget deficit, after foreign grant, for 2011/12 will jump to Rs 63 billion.

To bridge this gap, the government is eyeing to mobilize over Rs 28 billion in foreign loans while it plans to collect Rs 35 billion in domestic borrowings.

Property Disclosure

The new budget will seek all Nepali citizens to disclose their property voluntarily. But since the government is not confident that people would comply with the provision easily, the new budget will also announce an enactment of a new Property and Disclosure Law so that such disclosures can be made mandatory in the future.

"The long-term goal of the policy is clear; to maintain records of healthy money so that illicit earning and black money could be traced and anti-money laundering law could be enforced effectively," said the source.

The program fundamentally aims at strictly enforcing property tax and also put in place a mechanism that will tap ´high net worth individuals´, people with considerable investment potentials.

Export Promotion

The government will continue with the program of cash incentives that it promised to the third country exporters. It is also extending the facility to exports to India in a bid to boost country´s ailing exports, which have exacerbated trade deficit. "However, the facility will be extended for export transactions through letter of credit only," said the source.

"Exporters dealing through demand draft or telegraphic transfers will not get the incentive," stressed another source.

The government has promised 2 to 4 percent cash refund to the exporters bringing in exports earning in convertible currency.

Salary to go up by 25pc

It´s time to rejoice for government employees as the Ministry of Finance (MoF) has decided to raise their salary in a range of 20 to 25 percent, as recommended by a committee led by the Chief Secretary.

As is obvious, the lower level staff will enjoy a raise of 25 percent while senior officials will get the raise of around 20 percent. The government will adjust the existing dearness allowance of Rs 1,200 into the increased salary.

"With the change, total salary bill for government staff will go up by 24.81 percent, creating an additional salary bill burden of Rs 17 billion," said an MOF official.

Currently, the government spends Rs 70 billion in salary of civil servants, army, police, teachers and public health workers. In the new fiscal year, it will spend Rs 87.36 billion under the heading.

The technical team working out the raise had tried to limit the raise at around 15 percent, citing resource constraints and long-term liability. But its members eventually gave way after Deputy Prime Minister and Finance Minister Bharat Mohan Adhikari chided them for their resistance and asked them to do as he says.

The ministry was under severe pressure to adjust salaries mainly because it had deferred the adjustments for the last two years. During this period, the country witnessed back-to-back double digit inflation, resulting in a sharp rise in the cost of living.