Government’s delay in subsidies sparks concerns over economic stability

KATHMANDU: In a concerning turn of events, the Nepalese government has come under fire for its failure to fulfill promised subsidies across multiple sectors, leading to a mounting pile of unpaid dues for affected businesses. Despite initial assurances, the government’s sluggish revenue collection has caused significant delays in disbursing subsidies earmarked for various industries.

Official figures released in mid-March paint a grim picture of the country’s fiscal health, with the budget deficit soaring to a staggering Rs 137.75 billion. Revenue collection has lagged behind, standing at a mere 44.92 percent of the annual target for the first eight months of the fiscal year.

One of the most pressing concerns is the government’s inability to clear dues totaling Rs 2 billion in premium subsidies, along with outstanding payments of approximately Rs 12 billion in subsidized loans. Export-oriented businesses are also feeling the pinch, with Rs 1.10 billion in cash incentives still pending.

The delay in payments has triggered a ripple effect across various sectors, with the insurance industry particularly hard hit. Chunky Chhetry, president of the Nepal Insurers’ Association, revealed that insurers resorted to withholding policies due to delayed reimbursements from the government.

Despite a recent release of Rs 560 million, a substantial amount remains outstanding, raising questions about the sector’s financial stability.

Moreover, initiatives such as crops and livestock insurance, which were touted for their potential to bolster the agricultural sector, have been hampered by delays in subsidy disbursement.

The government’s promise of a 50 percent subsidy on insurance premiums, later increased to 75 percent, now hangs in the balance.

Banks and financial institutions (BFIs) have also been left in the lurch, with approximately Rs 12 billion in interest subsidies unpaid for over a year. Despite previous settlements totaling Rs 2.57 billion, the government’s failure to allocate funds has left BFIs uncertain about future lending practices, potentially stifling access to credit for deserving borrowers.

Exporters, too, find themselves grappling with uncertainty as they await the remaining Rs 1.10 billion in cash subsidies promised by the government. While Rs 900 million has been disbursed this year, the lack of clarity on the timeline for the additional amount adds to industry woes.

As businesses and industries struggle to navigate the economic fallout of delayed subsidies, stakeholders are urging the government to expedite payments and restore confidence in the country’s economic stability. Failure to address these concerns promptly could have far-reaching consequences for Nepal’s financial well-being.