Says the budget report
Finance Minister Namgay Dorji has said that economic self-reliance is a common goal and that the government’s fiscal measures are designed to achieve the same.
The government during the recently held donors’ conference in Thimphu acknowledged that the country will not achieve the national objective by 2020.
Presenting the annual budget 2017-18 to National Assembly on May 8, the finance minister said that most of the economic challenges that the country had to grapple with when the present government took over have been addressed through various fiscal and monetary policy measures.
Lyonpo Namgay Dorji said that the government’s Economic Stimulus Plan contributed to reinvigorating the growth and stability of the economy.
The government hopes that the recently launched Economic Development Policy (EDP) and Fiscal Incentives 2016 will further boost the economy.
Lyongpo Namgay Dorji said: “With numerous measures to reinvigorate the growth, economy has been growing steadily at an average of 6.12 percent over the last few years.”
Nominal GDP is projected to increase from Nu 159.9B in the current financial year to 180B in the new financial year.
Lyonpo Namgay Dorji said that with the completion of repayments for the aircrafts purchased in the financial year 2015-16 and the ongoing construction hydropower project nearing completion, Bhutan’s current account deficit situation is projected to improve significantly.
According to the budget report, the current account deficit was reduced to 23 percent of GDP in the financial year 2016-17.
The total government expenditure for the financial year is Nu 28.569B. This is an increase of 11.3 percent from last year.
The increase, Lyonpo said, is on account of payments for the electricity subsidy, provisions for National Council elections to be held next year, and the pay rise for local government members.
A total of Nu 250M has been allocated for the upcoming National Council elections and Nu 20M for by-elections. The government has proposed a 40 percent increase in local government members’ basic salaries.
The current expenditure accounts for about 82 percent of the country’s domestic revenue and 16 percent of GDP.
The total capital expenditure is estimated at Nu 29.346B. The government estimates that about 21 percent of the capital expenditure will be financed through domestic revenues, 57 percent through external grants, and 8 percent from external borrowings.
“The balance will be financed through domestic borrowings,” said Lyongpo Namgay Dorji.
External grants for the new financial year is estimated to be Nu16.7B. It includes a grant amount of Nu 1.7B and project-tied grant of Nu 12.145B.
Lyonpo said the government will continue to mobilise concessional loans from multilateral development banks and bilateral development partners.
According to the budget outlay, Nu 2.472B will be mobilised through external borrowings and project-tied borrowings.
Major activities in the financial year include development of industrial estates in Bondeyma in Mongar, Dhamdum in Samtse, Jigmeling in Sarpang and Motanga in Samdrupjongkhar. A total of Nu 374M has been allocated for these activities.
The government has also allocated Nu 73M for development of a mini-dry port in Phuentsholing. The government believes development of special economic zones and the mini-dry will enhance economic expansion and diversification.
The government has also incorporated one of its main election promises in the budget – establishment of fuel depot in gewogs. After having distributed utility vehicles to all 205 gewogs, the government has allocated Nu 50M for construction of fuel depots in 140 gewogs.
The government has announced fiscal incentives and exemptions for various priority sectors to encourage productive investments.
“However, given the narrow tax base and the increasing amount of revenue forgone through exemptions and incentives pose a considerable challenge in financing public expenditure,” said Lyonpo Namgay Dorji.
The total revenue forgone in the form of various exemptions and incentives was more than Nu 4.406B in 2016. The budget report estimates that about Nu 500M will be foregone in the financial year 2017-18 in PIT.
Currently, the country has tapped total hydroelectric generation capacity of 1,614MW. It is just 5 percent of the total potential.
On an average, the hydropower sector constitutes about 45 percent of the government’s gross revenue.
The new financial year starts from July. The total budget appropriation for the year is Nu 60.777B, including provisions for lending and repayment of loans.