Can economist-cum-finance minister Mahat resurrect economy?
When he entered Finance Ministry today afternoon as finance minister for the fifth time, everyone is expecting that Dr Ram Sharan Mahat has a magic wand that can work magic.
But the situation that he has been appointed as the finance minister this time is different in every way that he was in the ministry earlier.
The ballooning trade deficit – that stands at Rs 288.76 billion as of six months of the current fiscal year – rising inflation – that stands at around double digit – energy deficit – the country is reeling under 12 hours of scheduled power cut – and low development expenses have made the economy costlier and lives of the people more difficult, and fuelled unemployment.
As of the seven months of the current fiscal year, the government has been able to spend only 18 per cent of the capital budget with a swelling treasury of Rs 65 billion, and another Rs 50 billion excess liquidity in the banking sector due to low appetite of the private sector that has lost faith on political parties and successive governments.
Six years ago, when he was the finance minister for the fourth time, the situation was different, the CPN-Maoist – currently UCPN-Maoist – had just joined the mainstream politics shunning violence. He was free to work in his style. But now he has to balance the aspirations of coalition partners.
Mahat may find it easy to work with coalition as they also have vowed to give priority to economy in their election manifesto, says senior economist Prof Dr Bishwhambher Pyakuryal, who was once Mahat’s classmate.
Though all the political parties – especially the partner CPN-UML – have voiced seriousness in the economic agenda and shown willingness to work for prosperous future, it still has to be tested.
Apart from the coalition partners, Mahat might also find difficult to balance between his party’s ideological legacy as democratic socialism and his own liberal economic views for which he has still been blamed for selling state utilities for penny.
Post-1990 movement, when Mahat was assigned as the vice chair of National Planning Commission (NPC), he started economic reforms and brought the liberal economic policies opening the health, education, sky, and a lot of sectors for private sector. Over the years the private sector has become an engine for economic growth, though it has also deviated here and there, which has made Mahat’s task more difficult. On one hand he needs to correct the private sector and encourage it to play according to liberal economic market policy rules and on the other, start second tire economic reforms.
However, Pyakuryal thinks, Mahat is capable to turn the tide not only as a disciple of Keynesian school of thought but also as an experienced economist-cum-finance minister. “Mahat was a great lover of books and used to study a lot,” Pyakuryal says, remembering their college days. “The economy currently needs a shot in arms as it has structural problems,” he adds. “It is necessary to find out structural problems of priority sectors like hydropower, agriculture and tourism, and address them.”
Mahat as an experienced economist himself, knows the cure for the aliment, Pyakuryal opines.
The private sector is, however, happy to get him back in the Finance Ministry due to his pro-market image, and experience hoping that the economist will be able complete the economic reforms that has been left incomplete since he left the office in 2008, when the economy grew at 5.6 per cent, the highest in last seven years.
Not only the private sector, the bilateral and multilateral development partners of the country also trust him as a man of integrity and believer of probity and transparency in public life.
Mahat had twice voluntarily resigned as finance minister. When the opposition raised question about his foreign exchange accounts in a New York Bank in 1997, he resigned voluntarily to facilitate judicial investigation. He was acquitted and subsequently reinstated. Likewise, the second time he resigned in 2002 protesting the then Prime Minister Sher Bahadur Deuba’s unexpected mid-night dissolution of the parliament without consulting his cabinet fellows including himself.
But can Mahat work his charm to bring the economy back on track or not is still a billion dollar question as in the past too, he has been forced to backtrack his policy on subsidy despite being strongly against the subsidy on petrol that is mostly consumed by the urban populace.
Unlike earlier tenures, this term will not only be important for the country to move on the path of economic growth but himself as well, as it will also decide his future political course.
Challenges that stare at Mahat’s face:
- Expediting government spending.
- Containing inflation under eight per cent.
- Better utilising excess liquidity in the banking sector by building confidence of the private sector.
- Start second tier economic reforms
- Some 22 proposed Acts – including Special Economic Zone (SEZ) Act, Labour Act, new Insurance Act, Banking Act – are in Parliament for approval that could he cleared sooner to encourage private sector and create investment-friendly climate.