MTR: The economy is now stable Prime Minister Tshering Tobgay said at the mid-term review (MTR) meeting for Haa on April 1.
However, the country’s trade balance which is the net export less the import, is in deficit of more than Nu 32 billion (B). This means the country imports Nu 32B more than its total export value.
During the MTR Lyonchoen said the trade balance is an important indicator and to reverse it the country should increase domestic production.
Lyonchoen said the government is considering rural development to further stabilise the economy, which he believes is the key to successfully implementing the 11th Plan.
He said that budget allocation to the local government in the first fiscal year of the Plan could not happen as expected because the Plan could not be finalised instantly and funds had to be sought.
However, in the third fiscal year (2015-16), Lyonchoen said funds more than the planned budget would be disbursed. “We have a lot to do in the remaining years,” he said.
Initiatives like the gewog development grant (GDG), farm roads, farm shops, gewog banks, free electricity, rural tax exemption and Business Information and Opportunity Centre (BOiC) were all targeted towards rural development.
“Without a stable economy, 11th Plan will not succeed,” Lyonchoen said.
The economy at the beginning of the planned period, he said, was mired with issues like the rupee crisis, external debt, and loan and import restrictions.
In 2014, the economy grew by 5.5 percent to Nu 119.5B from Nu 105.3B. The convertible currency reserve improved from USD 726 million (M) to USD 815M.
The Indian rupee position has also improved, solving the unofficial exchange rate along the borders, Lyonchoen said.
However, the country’s external debt today stands at Nu 128.7B which was Nu 95.5B at the beginning of the Plan.
Lyonchoen said most of the debts are on account of hydropower, which are safe because it is not only self-liquidating in nature but also brings revenue simultaneously.
“Non-hydro debt is a concern and the government has been able to reduce it,” he said, pointing out that non-hydro debt dropped from Nu 40.9B to Nu 34B.
The 11th plan has a budget of Nu 213B, of which Nu 140B is estimated to derive from domestic revenue, Nu 56B from grants and the remaining Nu 17B from loans.
India alone committed Nu 45B in grant, of which the government received 42 percent. Lyonchoen said other countries and organisations have now committed Nu 10B additional grant from the initial estimate. Total grant would now be Nu 66B.
While the estimate was to generate Nu 42.1B of domestic revenue in the last two fiscal years, the actual achievement was 2.8B more than the target.
However, during the MTR of the finance ministry last month, it was revealed that the domestic revenue for the entire planned period could fall short of Nu 16B which was attributed to the delay in the commissioning of the planned hydropower projects.