Expert urge government to maintain fiscal policy and monetary policy

KATHMANDU: In order to alleviate the economy’s ongoing issues, experts advise the government to concentrate on diversifying tax bases in the upcoming budget as well as maintaining good coordination between fiscal policy and monetary policy.

The government should not rely more heavily than necessary on taxes on imported goods, according to economists and traders. They contend that increased illegal trading and increased revenue leakage are consequences of import taxes that are too high.

The gap between the market prices of goods in the Nepali and Indian markets has grown, according to a press release issued on Sunday by the Nepal Foreign Trade Association (NFTA). According to the press release, “it has encouraged the growth of illegal imports while discouraging the entrepreneurs from continuing their businesses within the nation.”.

Due to soaring government spending and sluggish revenue collection, the government has been severely limited in its ability to pay its bills. The Financial Comptroller General Office’s records show that with just two months until the end of the current fiscal year, the government has accrued revenue of Rs. 807 billion and outlays of Rs. 1.068 trillion.

The government typically raises taxes on imported goods like chocolates, snacks, alcohol, cars, and cosmetics, among other things. The primary source of revenue for the government is the tax revenue it receives on these goods. The government’s ten-month import restrictions on these luxury goods last year are largely to blame for the imbalance in the public finances. .

The majority of the nation’s economic transactions are informal. According to the NFTA, if the government increases tax rates further, it will only contribute to a growth in unofficial trade in the economy.

The pressure on the government’s revenue collection, according to former finance minister Yuba Raj Khatiwada, is a result of the illegal trading that grew during import restrictions. “It has hurt the revenue generation from customs duty, excise duty, and income tax,” he said. .

Khatiwada claims that the majority of macroeconomic indicators are currently performing pitifully. “The current recession is not a problem in and of itself, but it is creating a bigger threat to take the economy toward a severe crisis,” he continued.

Last year, when then-Finance Minister Janardan Sharma put pressure on NRB Governor Maha Prasad Adhikari to advance his personal agenda, a chilly relationship developed between the government and Nepal Rastra Bank (NRB).

Prakash Sharan Mahat, the finance minister, is alleged to be pressuring the NRB right now as well to lower interest rates in order to boost economic growth, disregarding the central bank’s independence to address issues with the nation’s monetary system.

If the Ministry of Finance and the central bank act independently and cease their cooperation, Pyakurel warned that the nation might experience an economic crisis. “Despite the fact that monetary policy is not covered by the annual budget, a strong relationship with the central bank is crucial. ” .