Fiscal Policy Highlights 2017

Fiscal Policy Highlights 2017/18

• In the current Fiscal Year, the economic growth rate has been projected to be 6.9 percent, the highest in the past two and half decades. It is estimated that the growth rate of the agriculture sector will be 5.3 percent. The growth rate of the Industrial Sector will be 11 percent, which was negative in the last fiscal year. Likewise, service sector will grow by 6.9 percent.
• The inflation rate has been declined to 3.5% in the first nine months of this fiscal year and it is estimated that the annual inflation rate will be lower than 6 percent in this Fiscal year.
• The post-earthquake reconstruction, new construction and rehabilitation activities have started to speed up through it was a bit slow in the initial phase.
• The capital expenditure in the first ten months of this fiscal year has been notably increased, it is estimated that there will be 84 percent expenditure out of total capital expenditure by the end of this Fiscal Year.
• The total revenue collection by the end of this Fiscal Year will be Rs. 580.98 billion which is 103 percent of the revenue target. There has been a gradual improvement in the foreign aid mobilization.
• The entire balance of payment in the first nine months of the current fiscal year is surplus by Rs. 50.64 billion. The remittance inflow has been increased by 6.3 percent compared to the same period of the previous year due to which the total remittance has reached to Rs. 511.93 billion.
• Having overall indicators positive, increasing trade deficit has remained as a challenge. In the first nine months of the fiscal year, export has increased just by 12.1 percent in a comparison to export that increased by 39.7 percent and trade deficit has increased by 42.7 percentage

Impact of Fiscal policies to capital market:

• Internal Capital Market has improved. The NEPSE indicator, which is measured of capital market, has reached to 1615 point on May 28, 2017. The Foreign Investors ledged to invest more than Rs. 1400 billion. Due to the improvement in liquidity in the Bank and Financial sectors
• Postal saving banks will be developed as the payment centre for the remittance, electricity, drinking water, telephone charge and social security allowances by expanding them in all local levels.
• The establishment of Infrastructure Development Bank which was initiated in the current fiscal year in the participation of national and international banks in order to increase private and foreign investment in the infrastructure sector will be completed in the coming fiscal year.
• Financial sector development strategy will be implemented Bank Account of all Nepali program will be implemented effectively. Banks will be encouraged to provide innovative financial services like branchless banking, e-banking and mobile wallet by maximum use of information technology.
• More priority will be given to the restoration of bank branches displaced during conflict period. Necessary arrangement will be made to open at least one of the commercial banks in each rural areas.
• E-payment system will be made effective in order to facilitate taxpayers to pay their taxes from any branch of the banks.
• Insurance companies will be motivated to expand their services, increase public awareness. It is mandatory to paying premiums for reinsuring their business to Nepal Reinsurance Company.
• National Health Insurance scheme will be expedited with the target of covering all Nepali citizen in health insurance within three years to end the situation of any citizen being deprived from primary health service due to lack of money.
• To connect province to national capital city and expedite construction of on-going mega projects and quality road infrastructure, there is sum of Rs 89.50 billion for construction of roads except the road infrastructure to be implemented by local level.
• Dependency over petroleum product will be reduced through the necessary production and distribution of electricity to meet the demand of household and industrial sector, replacing cooking gas and using electric transport.
• In order to increase national investment in capital formation, common people will be encouraged for saving. Financial literacy programs will be taken forward for implementation.
• Policy and institutional arrangements will be made for development and stability of capital market. Manufacturing companies will be encouraged to enter into the capital market. Stock exchange market will be made transparent and fully automated. Membership of the international regulatory institution on stock exchange market will be obtained.

Challenges of Fiscal Policy

1. Implementation of Federalism
2. Enhancement of Implementation Capacity
3. Increase internal production and productivity
4. Development of formal economy
5. Time bound reconstruction
6. Quality of public construction
7. Enhance governance capacity

Major Objective of Budget

• To support execution of the constitution
• To attain sustainable, inclusive and high economic growth
• To maintain macroeconomic stability
• To enhance access of general public to the service provided by the state

Priorities of Budget

• Execution of federalism
• Reconstruction of infrastructure damages by the earthquake
• Increase employment opportunities
• Increase in production and productivity
• Speedy implementation of national projects
• Agriculture modernization, commercialization and mechanization
• Hydroelectricity production, transmission and distribution
• Construction and improvement of road, railway and international airport
• Development of tourism infrastructure
• Investment on education, health, drinking water and sanitation
• Smooth operation and regulations of bank and financial institutions
• Enhance supply, storage and distribution of necessary consumable goods, and
• Improvement of public administration and service delivery