MB Subba

Taking into consideration the impact of the Covid-19 pandemic on the economy, the government has set five fiscal policy targets, including containing the GDP growth at a minimum of 2 percent, in the fiscal year (FY) 2020-21.

Before the pandemic, the GDP projection for the fiscal year was at 6.5 percent.

The second target is to contain the fiscal deficit within 5 percent of GDP. On an average, the fiscal deficit has remained at 7 percent of GDP.

The budget also aims to maintain the tax to GDP ratio within 10 percent and meet the current expenditure with internal resources in the new fiscal year. 

The tax to GDP ratio today stands at 14 percent.

The government also aims to maintain non-hydro debt below 35 percent. The non-hydro debt in FY 2019-20 was 25 percent of GDP. 

To achieve the targets, the government has identified various policy interventions, including the economic contingency plan (ECP) and reprioritisation of 12th Plan activities.

Under ECP, the government aims to involve Covid-19-affected people in various sectors, including agriculture, the Build Bhutan project, and the construction industry.

The activities within ECP are over and above the regular budget, according to the budget report.

Presenting the budget in the National Assembly on June 1, Finance Minister Namgay Tshering said that particular emphasis would be placed on revitalising the rural economy and creating employment opportunities.

“In order to overcome the present economic disruptions and with a view to stabilise the economy and stimulate growth, the government will continue to mobilise additional resources such as grants, concessional borrowings and other financing windows, including bilateral sources,” he said.

The finance minister said that as the domestic revenue was estimated to decrease by 14 percent, the government would rationalise the current expenditure by spending in areas where it is absolutely necessary and minimise wasteful expenditure.

He said that to contain the fiscal deficit within 5 percent of GDP, the government would implement an ECP over and above the regular budget.

“The fiscal target is expected to be achieved with concerted effort to mobilise additional resources and by exercising prudent expenditure management,” the finance minister said.

He said as domestic resources were limited and committed grants, not sufficient to finance the entire capital budget, the government would resort to concessional external borrowings and internal borrowings.

“As such, it will be important to ensure that all additional borrowings will be for investment, in keeping with the public debt policy,” he said.