Anomalies were highlighted during midterm review of MoF performance agreement

Fiscal: Some of the targets the finance ministry agreed to in the performance agreement signed with the government are contradicting other targets the ministry is working to achieve.

For instance, the ministry agreed to secure concessional loans, but securing more and more concessional loans to finance capital expenditure could increase non-hydro debt, and maintaining non-hydro debt below 35 percent of the gross domestic product (GDP) as agreed.

Likewise, the ministry also agreed to contain fiscal deficit at less than three percent of the GDP but at the same time it also agreed utilize more than 90 percent of the budget.

This was pointed out at the midterm review of the performance agreements yesterday, chaired by the prime minister, Tshering Tobgay.

The prime minister said that such contradictory actions must be discussed and reviewed, despite the comfortable situation today.  However, he said, since it was the first such agreement being piloted, more focused discussion with clear directives would be implemented from the second agreement.

As for the current targets, the finance ministry has already achieved 12 targets of the 22 success indicators, six others are on track and four are overdue.

As of December last year, fiscal deficit stood at 2.5 percent of the GDP, on course of the target.  Non-hydro debt also stabilised at 29.5 percent of GDP during the year.

On the constitutional requirement to ensure international reserve to cover 12 months of essential imports, the target in the agreement was set at least 20 months.  As of December, the country’s international reserves can cover 28.7 months of essential imports.

Domestic revenue currently constitutes 20 percent of the GDP, exactly meeting the target set in the agreement.  Domestic revenue even covers 61 percent of the total expenditure, surpassing the target by one percent.

As far as budget utilisation is concerned, the target was to use at least 90 percent of the approved budget during the fiscal year.  However, going by the spending, only 33 percent of the approved budget has been used till December last year.

This, the finance secretary, Lam Dorji, said, was because initial preparatory works were done in the first few months of the fiscal year, and that spending would improve towards the end of the fiscal year in June.  Moreover, capital works are carried out in advance, while payments are made towards the later half of the fiscal year.

Total approved capital budget for the FY 2014-15 is Nu 18.2 billion and as on December 29, last year Nu 6.08 billion has been spent.  Actual fund release as of date is Nu. 9.38 billion, meaning about 51 percent of the budget for the fiscal year has been already been released.

Another target was to bring down the variance between the approved budget and actual expenditure to less than five percent.  But, currently, the variance is 54 percent.  However, the secretary also justified that variation would decrease as capital works were completed, and current expenditure would be incurred during the remaining part of the fiscal year.

“Although the achievement figures aren’t even close to targets, given the fact that they will be achieved, the success indicators are considered on track,” said the finance secretary.

Starting Bhutan lottery targeted in December 2014 was shifted to the next fiscal year.

Other unachieved targets are initiating the e-procurement system, revision of financial rules and regulations and national inventory system, and it was reasoned that all these required IT expertise.

The prime minister suggested the ministry to consider setting a target for GDP growth, revenue from both tax and non-tax in absolute figures from the second agreement onwards.  Nevertheless, he said, he was extremely happy with the results.

Tshering Dorji