May 29, 2019 / 4:10 PM / 6 months ago

Nepal's communist government hikes social security spending in budget

KATHMANDU (Reuters) - Nepal’s finance minister on Wednesday hiked social security payments and civil servant salaries as he presented the annual budget for the Himalayan republic’s ruling communists.

FILE PHOTO: Nepal's Prime Minister Khadga Prasad Sharma Oli addresses the 73rd session of the United Nations General Assembly at U.N. headquarters in New York, U.S., September 27, 2018. REUTERS/Eduardo Munoz/File Photo

The Nepal Communist Party was elected to power with a resounding majority in 2017 but Prime Minister K.P. Sharma Oli, a moderate, has been criticised for not fulfilling election promises to raise social security allowances.

Finance Minister Yuba Raj Khatiwada, a former central bank governor, announced about 1.3 million people above 70 years of age will now get about $30 a month in benefits - a fifty percent increase in a popular scheme introduced 25 years ago.

Widows, the disabled and orphans will have their monthly allowances doubled to $20, a step that will benefit another 900,000 people, he said.

Khatiwada said civil servants, teachers, army and police personnel will have their basic salaries increased by 18-20%.

The changes begin on July 17, the start of the next fiscal year.

“The salary hike will raise the morale of the civil servants and make them deliver effective public service,” he said.

The leader of the opposition Nepali Congress party, Sher Bahadur Deuba, criticized the budget, telling reporters the government would struggle to implement the increases.

Khatiwada said about two-thirds of the total budget outlay of $13.71 billion would be raised from revenue collection and foreign grants. The rest will be met from internal as well as external borrowings from multilateral agencies.

Nepal has no commercial borrowings from international agencies, officials say.

Khatiwada announced a 50 percent increase in the controversial “constituency development” fund, which is meant to be spent by members of parliament on development activities in their areas. Critics say the funds could be used for political gains.

Khatiwada made no major tax changes but said agriculture- and export-oriented local industries would get incentives.

No details were given of that.

The budget set aside money for railway connectivity with neighbours China and India. Work on this will begin in two years, Khatiwada said.

Reporting by Gopal Sharma; Editing by Alasdair Pal and Andrew Cawthorne

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