“Challenging the Opposition: Where is the Alternative Budget?”

Finance Minister Professor Biman Prasad yesterday issued a challenge to the Opposition, asking them to present their alternative budget. This came after Opposition MPs raised concerns about the decision to maintain the 15 percent VAT in the 2024/2025 National Budget instead of reducing it to 9 percent.

Responding to these concerns, Prof Prasad explained that reducing VAT would result in a substantial revenue loss for the government, amounting to about $600 million.

“For every 1 percent reduction in VAT, we lose about $100 million in tax revenues,” Prof Prasad stated.

He questioned how the Opposition would address this revenue shortfall, asking if they were prepared to increase the fiscal deficit or take on additional loans to cover the gap. Prof Prasad also recalled his own time in the Opposition, when he was frequently asked to present an alternative budget despite the challenges in obtaining necessary information.

“Now they’re free. Where is the alternative budget?” Prof Prasad asked. He cautioned that much of the information coming from some Opposition members was incomplete, and warned that half-information can be both dangerous and misleading.

Prof Prasad emphasized that it was simplistic for Opposition members to suggest a VAT reduction without providing a viable plan to offset the lost revenue. He noted that the decision to increase VAT was made following extensive analysis, consideration of various options, and consultations with experts, including multilateral lenders and public input.

“We didn’t hide it. We knew it was not an easy call. So, we have to make sure that we get it right,” Prof Prasad said. “We just didn’t flat out get the 15 percent from thin air but it was based on our thorough analysis.”

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