Major initiatives to strengthen decentralisation on the cards

Finance: The initiatives to realise the government’s ideology of Wangtse Chirphel or power decentralisation has surfaced in a Nu 49.9 billion (B) budget outlay for the fiscal year 2016-17, which the finance minister presented yesterday in the national assembly.

A total expenditure of Nu 51.8B was estimated, of which Nu 25.38B is for current expenditure and Nu 26.49B for capital expenditure. But after deducting the net lending of about Nu 1.9B, the outlay was derived.

However, the country’s available resources or domestic revenue totted up with external grant, was estimated at Nu 41.6B, which is around Nu 8.3B short to meet the outlay. This fiscal deficit is 5.3 percent of the GDP.

The deficit would be financed through programme and project tied borrowings.

The estimated domestic revenue of Nu 27.24B is  3.6 percent increase from the previous fiscal year.

Current expenditure forms 93.2 percent of the domestic revenue. It is a constitutional requirement to meet the entire current expenditure from domestic revenue.

Increase in current expenditure, according to the budget report, is mainly due to upward revision of pay and allowances for the Royal Bhutan Police, provident fund and pension for the armed forces, establishment of additional central schools and revision of stipend and daily allowances for mask and folk dancers in the dzongkhags.


To further strengthen the decentralisation process and enhance good governance at the grass roots level, the government has proposed a Dzongkhag Development Grant (DDG) and allocated a share of human resource development budget to the dzongkhags.

“The budget for centrally executed activities usually allocated in the central agencies is now decentralized to the dzongkhags to the extent possible,” the report states.

The government will allocate Nu 7 million (M) each to the dzongkhags, in addition to the gewog development grant.

The Nu 100M, which otherwise was kept with the central agencies for enhancing the capacity of dzongkhags officials, will now be allocated to the dzongkhags.

Works initially budgeted under the central agencies and executed by local government as deposit works are now decentralised. For instance the budget for autonomous and central schools, flood mitigation and preparatory works for yenlag thromdes and health related awareness programmes will now be allotted to the local government instead of the central agencies. The fund for construction of security walls in the border towns is devolved to the local government from the home ministry.

Sectoral allocation

The education sector is allocated the major chunk (20 percent) of the total budget which comes to around Nu 10.9B. Health and education combined forms 28 percent of total budget.

Upscaling the initiative of central schools and enhancing the quality of education in 51 existing central schools are some planned activities during the 2016-17 fiscal year.

In the health sector, Nu 393M has been earmarked for construction of the district hospital in Haa, central regional referral hospital in Gelephu, district hospital in Tsirang and an additional wing, the Jetsuen Pema Mother and Child hospital at JDWNRH among others.

To increase domestic production of livestock products, Nu 241 M is allocated for various livestock projects.

For the blacktopping of 77 gewog centre roads, Nu 1.26B is earmarked, in addition to Nu 1.15B for ongoing construction of access roads and highways.

The special economic zones at Jigmeling, Dhamdum, Motanga and Bongdeyme is estimated to consume about Nu 382.8M.

An amount of Nu 105M is allocated for development of three domestic airports.

Economic outlook

The economy is projected to grow at about 7.7 percent in the 2016-17 fiscal year with inflation contained between 7 and 8 percent.

While the economic growth is expected to be driven by better performance of service and industry sectors, the external debt stock of the country is estimated to be around Nu 164.25B by the end of 2016-17.

The debt to GDP ratio is estimated at about 104 percent.

External debt is expected to grow by 14.9 percent on account of disbursement for ongoing hydropower projects (Puna I, Puna II, Mangdechhu, Nikachhu and Kholongchhu).

Hydropower projects account for Nu 130B of the total external debt. “Since these projects are considered to be commercially viable, they could service their debt through export of their own proceeds,” the report stated.

As for the non-hydropower loans, which is 21.7 percent of the GDP is borrowed from multilateral financial institutions and bilateral countries at concessionary terms.

The domestic debt, however is estimated to be Nu 57.3M by the end of 2016-17 fiscal year on account of loan availed by the Government from the National Pension and Provident Fund (NPPF) for the construction of staff quarters of Phuentsholing hospital.

The total debt services for the FY 2016-17 is estimated at Nu 8.2B, half of which would be serviced from the budget.

Current account deficit in the 2016-17 fiscal year is expected to improve at 27.7 percent of GDP.

Tshering Dorji