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New Nepal Govt Gets Flak for Budget Proposal

The political change that has come in Nepal should have been followed by a commensurate economic change

Jan Sharma writes from Kathmandu
EVEN as It alms to transform Nepal into Its vision of "democratic socialism." the new government faces a daunting task — starting with its budget
The government, the first elected one since the 1950s, recently presented Its budget go howls of criticisms from many shades of political persuasions.
Not least among the criticisms is that the new budget will Increase dependence on foreign aid at a time when economic policies are being realigned worldwide. Including Inside Nepal's powerful neighbour India.
Critics argue that the budget for 1991-92 (starting July 17) fails to respond to sweeping reforms to develop India into a free-market economy.
The total budget of 26.6 billion rupees Includes development expenditure of 16.8 billion rupees. The foreign aid component is 3.5 billion rupees. including 2.9 billion rupees in bilateral grants and 532 million rupees in multilateral grants.
In the absence of a significant mobilisation of resources, critics say the dependence on foreign aid is going to Increase from 52 per cent In 1990-91 to 70 per cent in 1991-92.
Aid has played a very critical role tn the kingdom's development. meeting 70 per cent of Its development bud-
ge’ •
The net deficit of 10.5 billion rupees in the current budget is expected to be met by 8.3 billion rupees In foreign loans and 2 billion rupees tn local borrowings. Bilateral loans amount to 1.8 billion rupees and multi-lateral loans amount to 6.5 billion rupees.
The political change that has come tn the country should have been followed by a commensurate economic change." says Man Mohan Ad-hikary, leader in parliament of the opposition United Marxix-Lenlntst Party. "What we see is the continuation of feudal attitudes and foreign influence,” he says.
The budget is purposeless, verbose and just a collection of old policies," says Dr Prakash Chandra Lohani, a University of California-educated economist who is one of four members of the deposed government who survived the May 12 parliamentary polls.
"It does not take into account the wide economic reforms being introduced in India." he says, adding that the plan to make Indian currency freely convertible within five years would be in the interest of Indian exporters and at the cost of Nepali exports.
India devalued the Indian rupee by 20 per cent against all currency and stream-lined trade procedures. The budget was presented a week after the Nepali rupee was also devalued
against the US dollar and I 79 per cent against the Indian rupee following New Delhi's devaluation move.
The tilt towards the poor and welfare Is by all means welcome." says Dr Bhekh Thapa, former Nepali ambas-
sentative In Kathmandu He says Nepal is the eighth country with the largest UNDP assistance
UN agencies as well a* ma-
K donors have helped Nepal fid Its Infrastructure In the
last 30 years. But the poten-
sador to the United States. But it could have been bolder, he adds.
The new budget eomes at a time when Nepal Is asking aid and development agencies for more. For example, the government Is discussing with the United Nations Development Programme (UNDP) future projects under the fifth country programme starting 1992.
The UNDP has pledged US$78 million for the five-year period ending 1996. an increase by 14 per cent over previous country programmes. An additional US$15 million is expected from the UN Capital Development Fund (UNCDF) and the UN Population Fund (UNFPA).
"It is a big programme by our standards.' says Jerrold Berke. UNDP resident repre-
tials for future development are hindered by shortages In capital investments.
Nepal's need for technical cooperation in the next five years will be far more in excess to the funds currently pledged by the UNDP. And Nepal wants to raise the level of assistance.
The central focus of UNDP activities In Nepal is the alleviation of poverty by expanding economic production, human resources development, strengthening of planning and administration and environment management
For example. Mr Berke points out "we think we need to give drinking water and irrigation projects to directly benefit poor farmers." But at the same time, he says, there
is an even greater need for Institution-building so that the government is tn a better position to administer Its poverty alleviation programmes.
Although classified by the UN as a "least developed" country. Nepal has an excellent foreign exchange reserve and sympathetic Western donors who have welcomed the change from the partyless political regime to a democratic. multi-party parliamentary system.
The UNDP has invested more than US$500 million in technical assistance grants since 1963. It has been Involved In 123 projects with another 46 projects In the
pipeline.
The focus of the economic programme of the present government is to alleviate poverty." says Dr Ram Saran Mahal, a respected economist who resigned his UNDP post in Pakistan to return home and help the new government. He is now an economic adviser to the Prime Minister.
Mr Berke of UNDP says he is Impressed by the openness, dedication and sincerity of the new government. The .ministers are open minded and communicating with them is easier. They make you feel comfortable. 1 am pleased with these changes, the breath of fresh air."— Depthnews Asia