NC: The National Council yesterday dissected the government’s annual budget report, pointed out flaws and made several recommendations.
It recommended the assembly to instate a law or to insert a provision in a law for sovereign guarantees of state-owned enterprises (SOE) after finding out that the government has given a sovereign guarantee of Nu 424M for loan availed by Bhutan Ferroy Alloys limited (BFAL) from Exsportfinan, a Norwegian bank owned by the Norwegian government and consortium of banks operating in Norway.
Sovereign guarantee is a government’s guarantee that debt obligation will be satisfied if the primary obligators, the SOEs in this case, default. The government then becomes the guarantor for the loan availed by the companies.
Council’s eminent member Dasho Tashi Wangyel pointed out that, by definition in the public finance Act, state-owned enterprises must have more than 50 percent government shareholding.
But BFAL has been incorporated as a joint venture company of the government, Marubeni corporation of Japan and Tashi Commercial corporation, with financial institutions, corporate bodies and public shareholding.
“The sovereign guarantee was given in 2004 and the public finance Act was passed in 2007,” Dasho Tashi Wangyel said, adding that the Constitution only mentions that the government may raise loans, make grants or guarantee loans in accordance with the law. “But there isn’t any law clarifying the sovereign guarantee,” he said.
The house resolved to recommend that either a new law or a provision in any law was required to address this. “It’s like mortgaging the nation’s wealth for loan availed by some companies,” he said.
Of the Nu 424M raised by BFAL in 2004 to import its furnace, the outstanding loan now stood at Nu 71M.
The government had also issued guarantee for Nu 500M and another Nu 400M availed by the Bhutan Development Bank from two local financial institutions in 2005 and 2008. It was availed to expand credit and enhance rural credit including the small and medium industries. The outstanding loan for both combined amounts to Nu 400M today.
Another recommendation the council made on the budget was on the Election Commission Bhutan’s (ECB) allotment of budget on the Bhutan Democracy Dialogue. DANIDA and the government would jointly fund the Nu 3M as per the budget report.
However, Paro council member, Kaka Tshering, said that the dialogue would involve political parties, and the Constitution prohibits the political parties from accepting any external findings. Some members supported the move, by saying that DANIDA funding the ECB’s democracy dialogue would be tantamount to external funding of political parties indirectly.
The council recommended that the dialogue be funded by the government only and not to accept external grant.
Among others, the house adopted the recommendations that money be set aside for raising poultry in each 13 select schools to be given to cooperatives, reflect in the budget report the details of subsidies provided by the government, need for allotment of budget to support electric fencing and allotment of budget to procure and replace vehicles for drangpons in the dzongkhags.
The council also proposed recommendations on the supplementary budget appropriation bill for the financial year 2014-15.
The recommendation was to seek clarification on specific budget amount transferred from ministry of information and communications (MoIC) for the G2C project and Gross National Happiness commission (GNHC) for the performance agreements to the lhengye zhungtshog and the subsequent changes in the respective agencies budget.
As the finance minister clarified on the budget report on June 11, Pemagatshel member Jigme Rinzin enquired on the 197 percent increase of budget from the original estimate in the lhengye zhungtshog.
However, the finance minister said the budget from the G2C project and performance agreement from GNHC was transferred from MoIC and GNHC respectively to the prime minister’s office. Lyonpo Namgay Dorji said, while the budget for the prime minister’s office has increased, the amount from the respective agencies has declined.
Later the members found that the budget from GNHC and MoIC had in fact increased from the original estimates.
Both the supplementary budget and budget appropriation bills were then passed unanimously with 23 members voting “yes” and one voting “No.”
By Tshering Dorji