Govt. comfortable with capital budget

… for frontloading activities of the 12th Plan

MB Subba  

The government yesterday assured that it would not face any shortages of capital budget although frontloading of 12th Plan activities will immediately increase the requirement of the capital budget amid limited resources.

Citing assurances for assistance from development partners, members of the government’s economic contingency plan (ECP) delivery unit said that there would be no issue when it came to capital expenditure.

“Our development partners have come forward and offered to provide support to the government, especially, the government of India,” said an ECP official at a press briefing yesterday.

One of the concerns, however, is how comfortable the country will be in meeting its recurrent expenditure from domestic revenues. There is a legal mandate to meet the current expenditure from the domestic revenue.

One of the major impacts will be a sharp fall in domestic revenues as many individuals and businesses would not be able to pay taxes. The government is delaying tax payments for three months. The revenue from tourism will be the hardest hit.

Officials said that the finance ministry is assessing how the country’s domestic revenue generating capacity has been affected.

On normal circumstances, the government has been able to allocate some portion of the domestic revenue for capital activities after meeting the recurrent cost.

Officials from ECP unit said that the economic contingency plan involves accelerating, reprioritising and frontloading of the 12th Plan activities.

The government is also incorporating new activities in view of the new reality, while some of activities are being deferred on a priority basis.

On the activities being frontloaded, ECP officials said one of the activities is the construction of all weather farm roads in gewogs.

“The construction of all weather farm roads was there in the Plan. They have been frontloaded and given a lot of priority now,” ECP unit officials explained.

The government is mobalising and reallocating funds based on priorities. This means that certain activities that cannot be implemented during the pandemic are being deferred so that the fund is reallocated to carry out a more essential activity.

Meanwhile, with tax breaks and other fiscal and monetary measures digging a huge hole in the government coffer, observers including some parliamentarians feel that the government should consider pay and allowance cuts as an austerity measure.

ECP unit officials said that there has to be some reason if the government has to go for pay and allowance cuts. “Ultimately if the worst situation comes, we might have to go into austerity measures and I think all options are open,” said an official.

The government’s strategy to revive the economy involves ramping up public spending.

However, there are several factors including shortages of construction materials and labourers impeding the government’s efforts.

The finance minister earlier said that the government wanted to promote public spending as part of its efforts to keep the economy running. “Works have been tendered out, but material shortages are a big challenge,” he said.

The construction sector is expected to see a shortage of cement soon. But the government hopes that the short-term working capital loans would enable the industries to continue the production.

The lockdown in India had affected the movement of raw materials. But some local manufacturers are receiving their supplies with help from the government.

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