MTR: Swelling expenditure and marginal increase in domestic revenue do not make for a good financial discipline.
This means that the country’s revenue, totted up with grants and borrowings, would be inadequate to finance the expenditure and debt servicing.
At the beginning of the 11th Plan, the domestic revenue in the planned period was projected at Nu 139 billion. However, the recent projection made in December 2015 revealed that the country could only generate about Nu 123 billion, resulting in a shortfall of Nu 16 billion.
This is attributed to the reprioritisation of the hydropower target since majority of domestic revenue comes from export of electricity.
The delay in commissioning of the 1200MW Punatsangchhu-I has come at the cost of slashing the 11th Plan target of augmenting the installed power capacity to 3,346MW from 4,546MW.
The installed capacity at the end of the last Plan was 1,480MW; the capacity was increased to 1,606MW because of the commissioning of 126MW Dagacchu early last year.
The Punatshangchhu-I is already running behind the schedule by two years because of unstable geological conditions and the Punatsangchhu-II has, reportedly, faced the same technical situations. As a result, the completion of Punatshangchhu-II is also lagging behind the schedule.
According to initial projections, Bhutan could lose Nu 13 million for every megawatt if the planned 10,000MW by 2020 does not come through.
The three projects of Punatshangchhu-I,II and Mangdechhu is expected to earn about Nu 30 billion annually. Should these projects be commissioned before 2018, the country could experience a budget surplus of about Nu 14 billion.
At the midterm review of the finance ministry yesterday, officials said that even after accounting for additional tax revenue, the domestic revenue would still fall short of Nu 16 billion.
It is a constitutional requirement that domestic revenue should be able to cover the entire current expenditure of the country. But the case of sluggish revenue growth and rising expenditure could threaten the constitutional mandate in the long-term.
On the expenditure side, the government had to undertake a lot of non-planned activities like formation of few new state enterprises. And, Bhutan could face scarcity of external grants and aids as the country graduate from the list of LDC.
Some gewogs have already commenced non-planned activities from the gewog development grant (GDG). Having started the activities, the GDG fell short and the gewog administrations are now requesting the government for funding.
Prime Minister shot down the proposal for additional funds stating that the guideline for GDG is clear.
Annual performance agreement being the basis for budget utilization and resource allocation, achievement of the targets is viewed as one of the annual indicators to achieving the 11th Plan targets.
During the mid-term review of the economic affairs ministry, last year, the ministry proposed to increase its non-electricity export to Nu 27 billion in next fiscal year from the current target of Nu 24.9 billion. If this target is achieved, it could help enhance the country’s revenue.
Tshering Dorji