Current expenditure reduced by 13 percent through re-prioritisation
The capital budget (excluding lending and repayment) for the fiscal year (FY) 2020-21 has been revised at Nu 38.883 billion(B) through re-prioritisation and nationalisation of activities, according to the budget performance report for the second quarter of FY.
The actual capital expenditure reported in the first half of the fiscal year (July-December 2020) was Nu 6.176B, which is roughly 16 percent of total capital budget. This means that about 84 percent of the capital budget remained unused at the beginning of the second half.
The budget utilisation report states that the release and expenditure in the second quarter was higher than the first quarter mainly because the implementation of the activities usually picks up from second quarter onward.
The capital budget utilisation in the first quarter of the fiscal year was 6 percent, according to the report for the first quarter.
However, the report adds that there is no sign of improvement with the current Covid-19 situation and that such unprecedented times demand decisive and timely interventions from the government to contain and prevent the spread of the disease. At the same time it should allow continuing few selected economic activities.
According to the report, the biggest shock of the pandemic was felt by the construction sector as this sector depends on foreign labour and materials. “The second round of the nationwide lockdown is expected to further exacerbate the progress of the implementation of the activities, as this happened during the peak-season for stockpiling and mobilisation of materials at site for resuming works beginning summer season from March.”
However, the report adds that the government’s re-prioritisation exercise would help the implementation of capital activities pick up and improve the budget utilisation, thereby help reinvigorate the economic growth and development.
The Ministry of Finance recently issued a notification, allowing budgeting agencies and contractors to defer the completion deadline of activities that have been affected by the Covid-19 situation. This is expected to further affect the budget utilisation plans.
To offset the impact of the Covid-19 by accelerating implementation of activities, Finance Minister Namgay Tshering in an earlier interview said that the government was working on amending the Construction Development Board’s rules that allow a contractor to take up a maximum of five works at a time. “There are contractors who are capable of handling more than five projects at a time,” he said.
Meanwhile, the current expenditure decreased by 13 percent in the first half of the current fiscal year as compared with the same period of the previous fiscal year.
The current expenditure was reduced through rationalisation of the current budget in view of the pandemic, states the report, which has been developed by the finance ministry in collaboration with the technical team from the World Bank.
The country has gone through two nationwide lockdowns after the budget for the current fiscal year was passed—the first one in August and the second in December of 2020.
In figures, the actual expenditure in the first half of the ongoing fiscal year was more than Nu 13.687B or 41.6 percent of the total current budget. The total current budget for the fiscal year is slightly over Nu 32.874B.
The report shows that as a result of the budget rationalisation, the expenditure under operation and management decreased by 29 percent. The government’s subsidies and grants to various sectors decreased by 27 percent.
The budget performance report states the decrease in the expenditure under the subsidy is because there was no expenditure made for the maintenance of government quarters in dzongkhags by National Housing Development Corporation Limited (NHDCL) in the first half of the current fiscal year.
Salaries and wages decreased by 3 percent while expenditure on interest decreased by 8 percent.
More than Nu 1.644B has been provided to various budgetary agencies for Covid-19 containment measures. Of this, Nu 1.272B was transferred from the General Reserve and Nu 371.86 million was supported under external funding.