The finance minister presented the government’s budget proposal on Monday. Here are some of my random thoughts on the budget.
Pay increase. Last year’s pay hike for public servants cost the government Nu 380 million.
PIT increase. The government made an extra Nu 247 million in personal income taxes last year, mainly because of the pay hike.
Tax refund. The government collected Nu 28 million by increasing vehicle taxes unlawfully last year. At the Supreme Court’s orders, the government has refunded that money to the taxpayers.
Government expenditure. The government’s expenditure for this financial year is budgeted at Nu 38,020 million. That works out to 45% of the GDP. But the government’s expenditure for the construction of mega-projects (several hydropower projects and one cement plant) is not included in the budget although it is included in the GDP. Similarly, the government’s expenditure on the armed forces is also not included in the budget. Factor them in the budget, and the government’s expenditure could get to above 80% of GDP. That goes to show how very weak our private sector is. That also shows how unproductive our farms are.
Current expenditure. The good news is that current expenditure (Nu 17,185 million) continues to be financed from domestic revenue (Nu 18,606 million)
Grants. 42.6% of the government’s total resources come from grants. 66.5% of the capital expenditure is financed through grants. India is by far the largest donor contributing 74.3% of the total grants.
Debt. The bad news is that the government’s debt will increase to Nu 55,721 million during this financial year. That works out to 66.02% of GDP. 60% of the debt is for hydropower projects. By 2014, total debt is projected to increase to Nu 79,472 or 71.63% of the projected GDP. By then, 68% of the debt will be from hydropower projects.
Hydropower. Revenue from hydropower is expected to fall this year mainly because of the “substantial investments required to address problems in the Tala plant”. The Tala plant was commissioned on March 2007.
Lottery. The government has decided to discontinue lottery operations in India. So it will forgo income estimated at Nu 200 million this year. The government should not completely pull out from the lottery business. Instead, it should clean up the current mess, and then improve the system so that much larger revenues can be earned from the sale of lottery tickets in India.
CDG. Nu 282 million has been allocated for constituency development grants for the past three years. 460 projects costing Nu 172 million have so far been identified. Of that only Nu 106 has been used. I still don’t agree with the CDG. But if it must continue, allow the local governments to use the funds. Another Nu 94 million has been kept aside for CDG this year.
More to come tomorrow. But in the meantime, please give me your views on these thoughts, and any others that you may have on the budget. The National Assembly will debate the budget on Friday.