By A Staff Reporter
Kathmandu, Aug. 22: Finance Minister Dr. Yubaraj Khatiwada said on Friday that institutionalising smooth fiscal federalism was the most challenging job to the government due to resource deficit.
Talking with Hartwig Schafer, vice president of World Bank in South Asia Region, Minister Dr. Khatiwada expressed his worries about smooth implementation of the fiscal federalism in the country.
However he was optimistic about doing that with the fiscal and technical assistance from donors. “We can do it quite smoothly because the sub-national governments are functioning well and performing better,” he added.
Stating that the COVID-19 has posed a huge toll to the global economy, including Nepal, he said that synchronised deep downturn to both the advanced and emerging economies, mostly in negative trajectory, had made recovery uncertain.
According to him, the countries were under pressure in both economic reasons and capacity building with capacity constraints of the health system and short supply of the medicines and logistics.
Dr. Khatiwada shared that the government provided immediate relief and financial as well as policy incentives and stimulus to the affected sectors. “We proactively imposed lockdown at the initial phase which supported us from many dimensions, but it led to a downward revision of targeted output by around 6 per cent,” he added. Dr. Khatiwada also said that survival of SMEs was a big challenge to the government.
Loss of jobs in informal sector and payroll protection in formal sector are the forefront issues for the government, he said. Not only this, trade, service and construction sectors also had a slow revival.
He said the pandemic could leave deeper economic scratches, make the recovery more prolonged and pose greater challenges to continue social protection to the vulnerable segments and strengthening health care systems. Tourism sector was hard hit, he said, adding, “The government has applied fiscal and monetary instruments for creating employment, continuation of social protection and liquidity injection as well as credit expansion.”
Despite adverse situation, the government was able to maintain stability in fiscal, monetary and external sectors, he said.
“Overall macroeconomic indicators are broadly in a good shape with inflation around 6 per cent, current account deficit at less than 2 per cent of GDP and the balance of payment surplus of more than 1.6 billion dollars,” he said.
Minister Dr. Khatiwada admitted a shortfall in revenue collection. He said that the budget of the current fiscal year had emphasised health and economic recoveries and announced several schemes to support the private sector for crowding in additional resources and deferral of immediate liabilities.
Dr. Khatiwada focused on the risk of COVID-19 pandemic and said reversal of development achievements made demanded several interventions in social sectors as well.
He said that the government was engaged in containing the spread of virus, resuming business activities and achieving the new normal output level which required additional resources. “We are much concerned about the foreign aid landscape during and the post COVID scenario,” he had said.
Finance Secretary Sishir Kumar Dhungana, joint Secretary Shreekrishna Nepal, Farish Hadad Zervosh, Country Director of WB, and operation manager Lada Strolcova were present during the meeting.