New budget to focus on rural development

Nepal’s forthcoming national budget, for the fiscal year 2006-2007 to be announced on 16 July, will focus heavily on rural development, senior officials at the Ministry of Finance (MoF) said on Monday. “The government will focus on rural rehabilitation with huge public investment in the forthcoming budget due to the new political situation,” said Finance Minister Ram Sharan Mahat in the capital, Kathmandu. An interim government was formed in April by seven leading political parties, after Nepalese monarch King Gyanendra gave up direct rule following mass protests. In June, peace talks began between the government and Maoist insurgents who have been waging a decade-long campaign against the state. Observers are hoping peace will deliver a “development dividend” with better security and access, more donor involvement and more public money for aid and development in Nepal. “The disparity between rural and urban incomes has grown, especially because of the former royalist regime which invested heavily in the military and did not implement most of the planned development programmes in rural areas,” said an official from MoF, who asked not to be named. Economic growth in Nepal has not grown more than 2.7 percent per year over the last decade due to the country’s political instability, according to the ministry. Nepal still remains one of the poorest countries in the world with 31 percent of the 27 million population living below the national poverty line, according to the World Bank. “If we carry on at the same rate [2.7 percent annual economic growth], then how can we alleviate poverty in remote villages? This is why huge investment is needed for the rural population,” the official added. The government is preparing an interim development plan with the emphasis on agriculture, tourism, rural employment, irrigation, drinking water and the empowerment of local communities. “Nepal needs budgetary planning and management with increased resources from the donor community. There is a permanent return to multiparty democracy and that will lead to economic growth of at least five percent a year,” said Mark Mallalieu, chief of the UK’s Department for International Development (DFID), one of Nepal’s largest donors. He further explained that aid agencies funding development programmes in the Himalayan kingdom were eagerly awaiting the budget to finalise their commitments for aid. The government is hoping for more international aid support: 80 percent of its current development budget is dependent on foreign assistance. “Our support will depend on how the government budget looks,” said Rajiv Upadhyay from the World Bank in Kathmandu. He added that the government was committed to cutting down on military spending to release funds for rural development.