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Where is the money?

Roving the length and breadth of the country, the four political parties are making one promises after another. Parties, especially the presidents are investing enormous amount of their time acquiring people’s trust and convincing them that promises would be delivered, provided people vote for them.

The 12th Plan that the new government will be implementing is worth Nu 335B and as a country dependent on donors, questions are being raised as to how the parties would finance their pledges as well as implement the 12th Plan.

Bhutan Kuen-Nyam Party

Bhutan Kuen-Nyam Party (BKP) president Neten Zangmo said that the 12th Plan, which was developed by the civil servants, is the framework and that the party has not pledged things that are unachievable.

“We don’t have, in our manifesto that we will give this and that,” she said. “Giving is easy but from where will you source them,” she said adding that power tillers are useful but the source of financing is a question.

On paper, she said that approval of 3,000 rural projects is impressive but assessment as to how each project benefited the people has never been made.

BKP’s manifesto, she said are mostly policy statements that could easily gel with the 12th Plan. She said that the only cost incurring pledge is to enhance rural life insurance benefits to Nu 50,000 and that the rest are already there in the 12th Plan.

The revenue from hydropower, she said are all consumed in meeting the recurrent expenditure. In this sector too, she said the country should take what it can chew. “For instance, harnessing 10,000MW of power by 2020 was ridiculous.”

External grants, loans and increasing the domestic revenue by investing in hydropower should continue, she said. “Whatever we pledged and we intend to do is not based on political interest but on research,” she said adding a research committee would be instituted should BKP come to power. Growth, she said has to spread out, based on agriculture and potential in every gewog. “The statistical book look good on paper but on the ground, the situation is different. There are so many wasteful expenditures,” she said.

 

Druk Nyamrup Tshogpa

Druk Nyamrup Tshogpa (DNT) president, Lotay Tshering said people could clearly make out which pledges are genuine, doable and which are actually required for the country.

He shared his grief as to how the country’s developmental philosophy of Gross National Happiness shifted post 2008. Notwithstanding the rapid economic growth, he said that the democratically elected governments started measuring the nation’s progress with GDP, a materialistic approach.

“For a GNH country, it’s like a vegetarian saying his favorite dish is chicken,” he said adding that even governments started measuring tourism by number of heads, undermining the high value – low impact policy.

“If people feel that it would be difficult for DNT to achieve what it promised, then what about a helipad and an excavator in every gewog, which cost about Nu 7M a gewog? he asked.

For instance, he said that every BHU and hospital is good enough to be converted into a hospital, given the existing infrastructure. “Thanks to the past government. But it is now time to equip these infrastructures with manpower and equipment,” he said adding that an ultrasound machine and labs for blood and urine testing would not even amount to Nu 7M, far less than procuring an excavator and power tiller.

“Overhauling the healthcare distribution is not a choice but a must,” he said adding that BHU was started in the 1960s to cover basic healthcare and that it is now time to graduate. “To brag about free healthcare, national budget should be in double figures, not 4.3 percent of the outlay,” he said.

As for funding, he said, “Any party that will come to power would have to depend on donors. There is no second option.”

As the country graduates from the LDC status, he said donor assistance would decline. One of the DNT pledges is to streamline the tax administration to seal revenue leakage.

“We have a big plan for private sector, CSOs and NGOs to shoulder most of the development activities,” he said. This, he said would avoid duplication and control wasteful expenditures.

 

People’s Democratic Party

President of People’s Democratic Party (PDP) Tshering Tobgay said the PDP government has not only successfully raised domestic revenue and grant but also concluded the 11th Plan with a small fiscal deficit of Nu 2B, compared to Nu 5B in the 10th Plan.

“We can confidently say that we can raise what is required during the 12th Plan. Where does this confidence come from? We have already estimated the amount of domestic resources and a lot of groundwork has been done in raising grant assistance from developing partners and institutions,” Tshering Tobgay said.

On the PDP pledges, he said the party has considered and incorporated the estimations and plans into their pledges. “We are not concerned.”

For instance, he said the East-West highway is worth Nu 7.5B, which is almost done. “So assuming we have the same source of finance and the same amount, Nu 7.5B suddenly becomes available, which we put into centrals schools, and that’s more than enough,” he said.

Tshering Tobgay said the government of Japan has committed to provide power tillers and in addition to the 1200, 700 more power tillers are on its way immediately. “So we need to raise only few hundreds,” he said.

Some, he said seemed to be concerned about providing backhoe in every gewog. Each backhoe, he said cost Nu 2M and it is a good investment to keep all roads in operation.

The PDP, if re-elected would control wastage, a budget of Nu 20B, he said, is already earmarked for salary and allowance revision of civil servants and local government leaders.

 

Druk Phuensum Tshogpa

Druk Phuensum Tshogpa (DPT) president, Pema Gyamtsho however, said that all its pledges are aligned with the 12th Plan. The funding sources are already identified based on the commitments from developing partners and prepared by the Gross National Happiness Commission (GNHC).

“Whichever party comes to power, grant from donors and loan form an essential component for development financing,” he said. Even for the 11th Plan, he said the DPT government had finalised the funding source and agreements signed with donors.  “Some parties claim that only they will be able to secure funds to ensure continuity,” he said. “This is not true.”

 

Fiscal projections

The domestic revenue in the 12th plan is projected to increase by more than 103 percent while the grant portion is expected to decrease by 20 percent, as compared to the 11th Plan, according to preliminary fiscal framework of the 12th Plan.

As per the preliminary fiscal framework worked out by the GNHC, the domestic revenue in the 11th Plan is projected at Nu 128.99B. This is expected to increase to Nu 262.9B in the 12th Plan.

Despite criticisms that tax exemptions would impact the revenue, tax revenue in the next planned period is projected to increase to Nu 165.5B from Nu 99.8B in the current Plan, which is an increase of 66 percent.

Non-tax revenue is estimated to grow by more than 233 percent, from Nu 29.1B to Nu 97.3B.

The grant portion is expected to decline from Nu 68.5B to Nu 54.4B in the 12th Plan.

Total resources, which is the grant and revenue totted up is estimated at Nu 317.34B in the 12th Plan compared to Nu 198.1B in the 11th Plan.

On the expenditure side, there is almost a 40 percent increase in the 12th Plan. The capital expenditure in the next Plan is estimated at Nu 115.3B and the current expenditure is projected at Nu 185.4B.

Considering the total revenue, grant and expenditure, the government budget is likely to suffer a fiscal deficit of Nu 5.4B. This means that the revenue and grant combined will be short of Nu 5.4B to finance the expenditure and lending.

To make up for the deficit, the government will have to borrow. As per the preliminary document, net borrowing in the 12th Plan is estimated at Nu 18B. The net borrowing is expected to increase by 165 percent in the 12th Plan compared with the current Plan.

According to the resource allocation plan, there is Nu 15B allocated for flagship programmes. Flagship programmes however, should be formulated as per the multi-sectoral issues that would help achieve the Plan objectives.

Both the central and the local government will be allocated Nu 50B each, and Nu 15B for the thromdes.

The preliminary document also states that 80 percent of the agencies’ capital resources shall be allocated to planned programmes and 20 percent of the capital resource can be used for ad-hoc programmes incorporated on an annual basis.

However, because the excise duty refund has been done away with the onset of GST in India, the government will lose about Nu 14B in the 12th Plan.

But much of the fiscal target is based on commissioning of the hydropower projects’ new deadline.

Punatshangchhu II was supposed to earn Nu 251B and scheduled to be completed by December 2018; Punatshangchhu I is expected to be done by June 2019. However, the Punatshangchu I is rescheduled to 2022 when the 12th Plan ends and the Punatshangchhu II to the end of 2019. Mangdechhu is expected to commission by the end of this year.

An option left to narrow the fiscal deficit is either to seek more grant or to  cut down current expenditure, should the next government avoid non-hydro debt as pledged.

Tshering Dorji

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