The finance minister has shown he can walk the talk but he needs to do more...
Ever since he took office, Finance Minister Baburam Bhattarai has been a man on a mission. Immediately after becoming minister, he came up with a budget that was both lauded and criticised for being too ambitious; and it did seem that it included everything under the sun. Then, he set out to mobilise internal revenue to levels perhaps unprecedented in history. He ensured greater vigilance at the customs and, through the control of corruption, managed to increase collection. By introducing the Voluntary Disclosure of Income Scheme (VDIS), he targeted the wealthy and sought to change the prevalent culture of hiding or under-voicing income sources. There was resistance, but the Finance Ministry was successful in raising a significant amount of revenue from the VDIS too. Then he imposed a 5 percent tax on total tuition fees for private schools, which, after prolonged confrontation with the schools, resulted in a compromise (the fee paying parents had to pay the tax out of their pockets).
These are real achievements, and the finance minister deserves credit for collecting Rs. 88.24 billion in revenue so far this fiscal year, which is 37.6 percent more than that collected in the same period of the previous fiscal year. And now, after his ministry's success in raising revenue, the finance minister has decided to go after the thousands of NGOs (both domestic and international), which lie outside the ambit of the state. Funds flow to these NGOs from a diversity of sources, often without the knowledge of the state. The minister wishes to see this changed, to regularise the rules applying to NGOs and to make transparent their funds and how they use them. This is a laudable goal too. It is yet to be seen how much success the minister will be able to accrue here, but we wish him success.
Unfortunately, the government has yet been unable to utilise the revenue it has generated this year. Nor has it been able to utilise much of the foreign aid that has come in this year, again surpassing by 45 percent the aid received in the previous year. So there remains about Rs. 25.4 billion in the treasury that remains to be spent. Bhattarai blames lack of consensus between the major political parties for the inability to spend on development. This is to an extent true: the parties have been unable to come to a consensus on modalities on forming local governments, and as a result, local government positions continue to remain vacant. As most of the development expenditure this year is meant to go to local bodies, the formation of local governments is a prerequisite for the disbursal of these funds.
So far, the Finance Minister's activities have been of one kind: he has tightened vigilance and threatened punishment to all who are unwilling to abide by the rules. This has brought dividends, and -- in the case of NGO regulations, for instance -- will continue to do so for some time to come. But if the fruits of the accumulated revenues are to be realised, a substantially different kind of activity is needed from the Finance Ministry. Its activities so far were achieved by mobilising resources within the ministry itself. There was no need for much cooperation with other bodies. But if the funds are to be spent productively, the ministry has to work closely with other state bodies, the Maoist party has to reach a consensus with other political parties. This, therefore, requires a substantially different kind of politics than the one required for raising revenue. We hope that Finance Minister Bhattarai is able to rise up to this challenge as well.
4th April, 2009, The Kathmandu Post (Editorial)
