Says Covid-19 response expenditure would be met

Yangchen C Rinzin

The government has spent Nu 2.9 billion (B) in the Covid-19 pandemic response since March. The expenses account mainly for the purchase of Covid-19 test kits, personal protective equipment, facility quarantine, and stocking of essential items.

Of the Nu 2.9B, about Nu 2B was spent from March till June and about Nu 940 million(M) was spent from July to September, according to finance minister Namgay Tshering.

The minister said that every expense for Covid-19 response was met from fund mobilised through a lot of internal arrangements and fiscal prudence.

“We’re still managing to meet the expenses even though no budget was earmarked for Covid-19 response or planned in 12th Plan. We didn’t know pandemic would hit Bhutan, but we’re meeting and responding to the ad hoc expenses unconditionally.”

Other expenses also includes Nu 4B allocated and planned for Economic Contingency Plan such as the Tourism Stimulus Plan and the agriculture ministry to engage people laid off due to the pandemic, trade facilitation, and engage youth in the construction sector through Build Bhutan Project. “The activities were designed in response to Covid-19,” Lyonpo said.

The finance ministry, however, is yet to compile the expenses incurred during the lockdown, as payments are still being made for various ad-hoc expenditures.

Internal arrangements

A reprioritisation of 12th Plan activities was one of the internal arrangements made to meet the expenses of Covid-19 response activities.

Prime Minister Dr Lotay Tshering said that although reprioritisation was possible theoretically, it was difficult practically, as most of the activities were already started. Lyonchhen said almost 85 percent of the plans were in infrastructure and constructions.

“Almost 40 percent of the construction works have started. We cannot stop the work as this would have its impact on the cost,” Lyonchhen said. “Work for some of the activities are already awarded and we cannot help it but continue.”

Most works were construction of lhakhangs, schools, roads or hospitals. Almost Nu 3B worth of construction works are on-going under the Royal University of Bhutan, which couldn’t be stopped.

Lyonchhen said this is why in the reprioritisation, only those activities that have not started and unlikely to complete on time were slashed including activities that would be required but would take 4-5 years to complete.

The Gross National Happiness Commission is responsible for the reprioritisation of the 12th Plan.

Finance minister Namgay Tshering said that the ministry is readjusting plan activities apart from keeping a certain amount as general reserve.

The arrangement was to free up the budget from the total allocated budget of Nu 310B for 12th Plan, of which, Nu 195B is for the current budget and Nu 115B for capital budget.

As per the Disaster Management Act, 2013, during a pandemic, the finance ministry can “free up budget unconditionally” to meet mitigation measures or activities.

“In the current situation, we’ve ensured that the readjustment of the budget did not impact the implementation of regular activities as much as possible,” Lyonpo said. “There were some activities that were complete, but the entire allocated budget was not utilised. We saved from such activities as well.”

Lyonpo added that important activities that have not been implemented yet are not removed from the plan as these activities would promote government expenditure and circulation of money in the market.

“Finance ministry is reprioritising the fiscal budget for 2020-2021. We’ll try not to leave plan activities but see how we can stagger these activities and implement promptly. This will pump money in the market to run the economy.”

Govt. can meet increasing expenses

With increasing expenditure and several economic activities on hold, spending has risen with a limited budget. However, Lyonchhen said it was the government’s responsibility to mobilise resources to ensure expenses are met and people’s well-being is taken care of.

“I’ve never said we don’t have money: the government is not broke,” Lyonchhen said. “His Majesty has always said it’s the government and the king’s responsibility to look for funds, but we must not let people suffer because of the pandemic.”

However, agreeing on an increase in spending and expenses, Lyonchhen said there were several unaccounted expenses such as the cost of quarantining people who travel from high-risk to low risk areas. Each test costs almost USD 8. The interest waiver and loan deferment also adds to the government’s expense.

“It’s obvious that there is a lack of budget when a nation’s economy is down and expenses increasing, but how can a government declare to be broke and keep quiet,” Lyonchhen said. “It’s also true that the government was able to plan and solve the problems because His Majesty’s kidu relief cushioned the biggest crack, which is kidu given to people who were badly affected by the pandemic.”

He said the government would ensure Covid-19 expenses are met. “Bhutan will have to survive and the government will ensure that all expenses are met.”

However, he said planning would be possible if people are willing to help and work together with the government.

“You can suggest if we’re going wrong and help the government with its planning. But if you keep quiet when the government seeks suggestion and make a noise later because your expectation was not met, then we’re going wrong.”

Revenue plunging and expenses increasing: what’s next?

With the reprioritisation and redesign of plans, Lyonchhen said that any activity planned hereafter should ensure that it creates employment, digitization, ensures food sufficiency and substitute import.

“Revenue has dropped by 14 percent from the beginning, and we’ll have to readjust the budget if it drops further,” he said adding that the government has to export to revive the local economy and support domestic revenue generation.

Lyonchhen said the government would look into investing in innovation, reskilling and employability hereafter. Recently, the government also issued bond worth Nu 3B at a 6.5 percent interest rate. “Investors will buy the bond, and the money will be used for the economic activities in the market.”

However, he said that to ensure trade in the market, the government needs to build a mechanism that eases doing business. The finance ministry and the central bank will explore relaxations of monetary policies.

“Our job is to make a business environment conducive and access to finance convenient by making financial institutions lend loans. The main hurdle in the private sector is access to finance and policy backstopping.”

The government will also launch a national credit guarantee scheme this month where the government will support the private sector through collateral financing. In this case, the government will act as a guarantor.

Lyonchhen said he has asked financial institutions to lend money at low lending rates and that the banks are already working on it.

“Banks cannot shut down when businesses close during a pandemic. If they do not help but make profit for themselves during the pandemic, I’ll make sure I inform the people that they were busy making profits when our people were suffering.”

He said he has also met Supreme Court officials and the chief justice to request the court to also contribute by studying the cases. “They should clear cases that have an economic impact such as withholding of loans and freeze on constructions and use of trucks and machinery. We can at least use a few hundred trucks and excavators in the market to run the economy.”

Covid-19 response fund account 

Given the dire need for funds to sustain measures against Covid-19, individuals and institutions made voluntary donations for the cause every day since March. The donation was either handed over to the government or donated through the Covid-19 fund account maintained with financial institutions.

Contributions from international partners and donor agencies were also put into the same account.

Finance minister Namgay Tshering said that as of today, the total donation had reached Nu 105M and the government has not used a Ngultrum from the donation for Covid-19 response expenses.

“The money donated is still intact with Covid-19 account and has not yet decided if the amount would be transferred to the kidu relief fund. We have retained the amount for now.”

Lyonchhen said that as almost Nu 5B is already spent for kidu relief, the donation could be used for the relief fund. As of now, the relief fund is met through a national resilient fund that has a reserve fund of Nu 30B.

With the expenses increasing and government bearing the entire cost for the Covid-19 tests, some shared that those who can afford could pay for the test kits during a mass testing.

However, Lyonchhen said that the government would not make it mandatory or ask an individual to pay. Should they be genuinely concerned, he said, they can directly deposit through the Covid-19 fund account.

Each test, especially RT-PCR, costs Nu 3,500.

“Why would you like to announce that you’re paying and donating? If you want to help genuinely, quietly donate right after the test,” he said. “Even those who are in quarantine and want to help, you can donate and not necessarily come to me with cash.”