“We are facing lots of problems on the law-and-order front and business is suffering,” Pandey, who is scheduled to unveil the nation’s budget on July 9, said in an interview in Kathmandu on Tuesday.
“My priority in the budget will be to address the security issue.”
Regional, ethnic and political violence erupted after the Maoist party, which took power less than a year ago after winning a general election, lost control of the government last month following a dispute over sacking the army chief. The Maoists have pledged to boycott parliament and disrupt daily life until the president reverses his decision to reinstate the head of the army and apologizes.
“If strikes and blockades continue, industrialists will be compelled to close their business,” said Kush Kumar Joshi, president of the Federation of Nepalese Chambers of Commerce and Industry. “The security of investors and their investments are the main problems facing the industry.”
Industrial production dropped 1.5 percent in the eleven months through May. The key challenge facing Nepal is to rebuild the “legitimacy” of the state and maintain law and order, the World Bank said in a report on the Himalayan nation in April.
Pandey said he will increase the allocation for police and set aside money to raise a special industrial security force, without providing further details about the spending.
Disrupt Growth
The unrest may slow growth in the $9 billion economy to 3.5 percent in the year ending June 30 from 5.6 percent in the previous year, Nepal central bank Governor Deependra Bahadur Kshetry said June 22. Obstruction to the transport of farm goods and industrial products has created shortages and pushed the inflation rate to 11.9 percent in March from 9 percent a year earlier, the governor said.
“Law and order must be addressed if business is to flourish,” Mike Foster, U.K.’s Minister for International Development, said on April 2, when he announced 172 million pounds ($283 million) of aid to Nepal over the next three years.
Foster said local business leaders he met considered a lack of basic security as the “major barrier to their success.” In the past few months, 50 businessmen have been killed and $200 million lost to strikes, he said in a speech published on the U.K.’s Department For International Development Web site.
Political Turmoil
The Maoists, who ended a 10-year insurgency in 2006, led the first government since lawmakers a year ago voted to scrap the country’s 240-year-old monarchy and turn the Himalayan nation into a republic. More than 13,000 people were killed in the decade-long civil war between security forces and the former Maoist rebels.
Political chaos has flared up again as Maoist supporters staged nationwide demonstrations after their leader Puspa Kamal Dahal resigned as prime minister last month.
Dahal stepped down after the president overturned his decision to fire the army chief for refusing to integrate former rebel fighters into the military. A group of rival political parties, led by Madhav Kumar Nepal of the Communist Party of Nepal (Unified Marxist-Leninist), formed a new 22-party ruling coalition in May.
“The Maoists are building their political base by inciting the unemployed youth – my budget statement will have programs to increase employment,” Pandey said.
Infrastructure, Energy
Pandey said he will also increase the allocation for infrastructure development including hydro-electric power after Nepal declared a national energy crisis in December.
“We have enough room to spend,” the finance minister said.
He said tax collections have risen by a record 32 percent to 142 billion rupees ($1.8 million) in the current financial year as the government gave incentives to officials who met their collection targets.
Besides, the government borrowed just 8 billion rupees in the fiscal year ending this month against a target of 25 billion rupees in the budget as tension and violence in the country hindered government spending, the minister added.
Nepal, which finances its budget shortfall using foreign loans and local borrowings, expects the budget deficit to remain at about 2 percent of gross domestic product next fiscal year, Pandey said. Nepal had a 265 billion rupee budget for the current financial year.
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