The finance minister has presented a supplementary budget of more than Nu 3.866 billion (B) for fiscal year 2021-22 in Parliament.
A supplementary budget refers to a budget that is provided in addition to the budget approved by Parliament in the previous budget session.
The total budget appropriation for fiscal year 2021-22 has been revised from Nu 80.483B to Nu 84.35B.
Finance Minister Namgay Tshering attributed the increase in the budget to the incorporation of externally funded projects including Covid-19 related activities.
The total resource for the fiscal year 2021-22 has also been revised to Nu 60.288B from the initial approved total resources of Nu 56.765B.
The increase is about 6.2 percent as compared to the approved estimates which is attributed to the increase in receipts of total Nu 46.929 million (M) from internal sources and external grants of Nu 3.475B.
The estimated and revised domestic revenue for the fiscal year 2021-22 remained the same at Nu 35.6B.
The grant estimate for fiscal year increased to Nu 24B from the approved estimate of Nu 20.525B.
Presenting the supplementary budget, the finance minister last week said that economic activities began to return in the first quarter of 2021 as Covid-19 spread slowed and containment measures were gradually eased.
He said that domestic demand steadily recovered and consumer confidence returned. “Growth in wholesale and retail commerce, as well as hotels and restaurants also improved.”
He said that the economy was projected to rebound and grow at 3.7 percent in 2021.
“However, the rise in inflation in 2021 was largely due to supply-side bottlenecks and a stronger than anticipated rebound of demand and increase in both food and non-food prices.”
Lyonpo Namgay Tshering said since the pandemic hit two years ago, unprecedented measures had been taken to address the initial shock waves.
“Amidst this environment, supply disruptions and energy price hikes triggered a supply shock that the war in Ukraine now exacerbates,” he said.
He said energy and food prices have become major inflation drivers, putting pressure for monetary stimulus to be withdrawn while the recovery is still nascent in many economies.
“In Bhutan, the economy has made significant progress in terms of per capita income and witnessed unprecedented expansion over the last four decades,” he said.
According to the finance minister, inflation remained in single digits while macro-fiscal stability remained strong. “With the expected commissioning of two mega power plants, the medium-term outlook also appeared bright.”
The economy experienced the worst full-year recession of -10.1 percent in 2020.
Food prices contributed to about 60 percent and non-food contributed to 40 percent of the overall inflation rate in 2021.
With the build-up of inflationary pressure and imported food prices continuing to rise, the overall inflation in 2021 peaked at 7.4 percent.