‘Govt should ramp up development spending for economic prosperity’

Kathmandu, May 26

The government’s annual spending in infrastructure sector should be between seven to 12 per cent of the gross domestic product, or $4 billion to $6 billion, for the next several years to leapfrog the economy, according to experts.

While the current budget allocation in the sector stands in the range of seven to nine per cent of the country’s GDP, the expenditure rate is retarded.

“Government’s investment in public infrastructure, like roads; energy; information, technology and communication; irrigation and drinking water is a must to unleash the economic opportunities as these infrastructure function like a network for growth,” said Swarnim Wagle, former vice chairman of National Planning Commission.

“The government, through ‘Policies and Programmes’, has envisioned nearly double digit growth from next fiscal and double digit growth within five years. But to accelerate economic growth, huge investment is required in every sector.”

Growth of industries, tourism, agriculture and other sectors, which are considered as the drivers of economic growth have been stagnant due to low investment. To achieve dramatic progress, the country requires fresh investment in every sector, as per Wagle. “Congenial policies in sectors like tourism, industrial and agro processing to attract private and foreign investment, and government’s investment in other physical infrastructure like electricity, road (transport), irrigation are critical.”

The government has envisioned dramatic leap in the economy, like doubling the per capita income, agricultural output, increasing per capita energy consumption from 110 kWh (kilowatt hours) to 1,500 Kwh within five years.

“Though not impossible, the dramatic transformation of the economy as envisioned in the ‘Policies and Programmes’ of the government requires huge investment,” Wagle reiterated.

“For instance, $30 billion would be required to generate 15,000 megawatts of electricity within 10 years.”

Hydropower sector could lure more investment if the government controls leakages and corruption and simplifies investment process. “While developing a hydropower project, an investor needs to work with seven ministries, 23 departments and has to abide by 23 laws. The chances of corruption magnifies when we create a more process-oriented system,” according to Wagle.

Likewise, to double agricultural output, the government must expand irrigation benefits. Round-the-year irrigation facility is available only in 25 per cent of the total 1.8 million hectares of arable land in the country. The government can obtain resources as multilateral development partners like World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, among others, are ready to expand their lending limit to Nepal. However, due to various constraints, the country has not been able to spend the capital budget of even around $3 billion, as per Wagle. “A big bang reform is required in public spending, mainly in development expenditure.”

In terms of doubling the per capita income by next five years as stated by the ‘Policies and Programmes’, it is more ambitious target, as economic giants like India and China took 10 to 12 years to double their per capita income. “To double the per capita income in five years, we would need to have double digit growth year after year from next fiscal,” as per him.

Citing a miraculous growth of information, telecommunication sector in the last decade, Wagle said that every sector of the economy would have to witness similar growth for the transformative/dramatic changes in economy as envisioned by the government’s ‘Policies and Programmes’.

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