…budgetary agencies to be held responsible for the non-compliance

Thukten Zangpo

The finance minister notified the budgetary agencies to pay the bills or claims within the stipulated time after the contractors shared their concerns on the delay in the payment from the procurement agencies.

The minister, on January 20, notified that the budgetary agencies have to clear all payments within the stipulated timeframe of 30 days, and in line with the contractual agreements, effective from January 23.

The notification comes after the contractors raised the issue to the finance minister during the meeting with the private sector on January 18 in the Bhutan Chamber of Commerce and Industry hall, Thimphu.

The Executive Director of the Construction Association of Bhutan (CAB), Tshering Younten said that the contractors’ loan repayment is solely dependent upon the bills.

“When the government or procuring agencies’ bills remain pending, the contractors are not able to pay the loan, going into non-performing loans (NPL),” he said, adding that some bills have been pending for six to eight months.

NPL are loans with payments that are overdue by 90 days or more.

As per the central bank, once the loan account goes into NPL, the loan account will have to undergo a six months cooling period with no bank guarantee and letter of credit, even after the repayments.

“This has impeded contractors from being able to bid or take part in competitive bidding processes where such banking facilities are required,” President of CAB, Trashi Wangyel said.

About 12 contractors were terminated from work for failing to produce bank guarantees.

The minister notified that the construction sector has been experiencing increased loan defaults from the delayed payment of bills or claims.

It added that the loan-defaulted construction firms are put under a cooling period without access to credit from the financial institutions, adversely impacting the progress of the on-construction works.

The notification also stated that the budgetary agencies will be held responsible for non-compliance with the Rules and Regulations.

The Section 7.5.3.2 of the Finance and Accounting Manual 2016 Manual states, “Subject to the terms of agreements, the payments against works shall generally be made against running account bill and the payments against supplies shall be made in proportion with the actual supplies within 30 days from the date of receipt of claims.”

Tshering Younten said that the government has acted as requested to clear all the pending bills, which will help the contractors.

He asked if the government could provide at least three months’ time to enforce the cooling period, the contractors could collect their bills from the government and clear the NPL.