Does the new budget address the concerns over unemployment?

The budget for FY 2021/22, amounts to Nrs. 1.647 trillion, with its central focus on dampening the effects of Covid-19 contagion that has ravaged the nation’s health system. Presented through an ordinance, 41.2 percent of the budget has been allocated for recurrent expenditure while 22.7 percent, 12.6 percent, and 23.5 percent have been assigned for capital expenditure, debt financing, and fiscal transfers respectively. With an increment of over 10%, the health budget stands at Nrs. 100 billion, a much-required addition to helping the country’s health infrastructure and vaccination drive. As a corollary focus, the budget also promises support for new and existing labor forces eyeing an entry into the labor market. A 33% increment for all things social security, has widened the social security net, a respite for those whose jobs have been displaced due to the pandemic. But with a large number of immigrants returning home from their jobs abroad is sure to stain the social security net. Add to that, a sub-optimal jobs program that has failed to absorb the demand for employment since its inception in 2019, and the labor market is exposed to the risk of being oversupplied. 

According to the Nepal Labor Migration report, the number of labor approvals issued by the Department of Foreign Employment was 354098 and 236208 for FY 2018/19 and 2019/20. An estimated 3.5 million Nepalese citizens have migrated abroad in search of job opportunities. As the covid-19 pandemic has put a wide sector of the global economy under threat, the International Labor Organization estimates that nearly 127,000 migrant workers are likely to return to Nepal. Also, in a recent survey conducted among migrants returnees by IFAD, about 77 percent of the returnees are no longer willing to re-migrate abroad.

The current budget has tried, to some degree, to address the disruption in the job markets. For instance, the government has provisioned for a two-month waiver in contribution to be made by the employers. Similarly, a concessional loan at 5% is to be provided to returnee migrants and promises to use viability gap funding to help private sectors thrive and create more jobs. Despite all the efforts, new job opportunities for laborers at all skill levels must be created in the long term. The government’s response to creating new jobs has been tethered to continuing the Prime Minister’s Employment Fund(PMEP). 

The budget has allocated Nrs. 12 billion to the PMEP in an effort to create 2,00000 jobs in the upcoming fiscal. However, the outcome of the program has been dismal since its inception in 2019. In the fiscal year 2019-20, the PMEP was able to register 743,081 unemployed workers, out of which more than 99 percent were yet to get jobs. According to the Ministry of Labour, Employment and Social Security, 175,909 applicants from 599 local units were employed for 13 days on average in the first year of the program. The PMEP guarantees minimum employment for individuals between 18 and 59 years of age. Also, a worker employed for less than a minimum of 100 days in one fiscal year is eligible to receive a sustenance allowance equivalent to 50 percent of the minimum wage for the remainder of the period given the worker fulfills certain criteria. One criterion for the allowance is that none of the family members of the receipts are employed in a foreign country. An inflow of returnee migrants will effectively bloat the numbers of registered workers under PMEP who will now be eligible for an allowance, should the program fail to guarantee jobs. But PMEP’s own ability to sustain the program depends on fiscal space, the propensity of the provincial and local government to implement development projects, and involvement of the private sector among other factors. 

Considering the current trend of federal/sub-national governments to realize infrastructural projects and utilize their capital budget to create space for more laborers, absorbing the demand for jobs seems unlikely. An inflow of returnee migrants would only add to the woes of the government as more jobs will be needed and extension of sustenance allowance would deplete the fund quicker than expected.

Navneet Jha

Navneet is a researcher at Samriddhi Foundation.


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