Recurrent budget to ministries as block grants

MB Subba

The government has come up with major changes in the annual budget 2020-21, which will see a significant increase in the overall allocation, as part of its strategy to offset the economic impact of Covid-19 pandemic.

One of the major changes, Finance Minister Namgay Tshering told Kuensel, is that the government will allocate recurrent budget to all budgetary agencies including ministries and dzongkhags as block grants.

This means that individual agencies will independently utilise the recurrent budget based on their needs and priorities. This system has been applicable to gewogs only so far.

Lyonpo Namgay Tshering said, “With this introduction of the block grant system, we are trying to ensure that everyone takes the responsibility and accountability to reprioritise activities and limit the expenses within the block grants.”

Another major change is the reversal of the past trend. The capital budget will be higher that the recurrent budget in the 2020-21 fiscal year.

The finance minister said that the change in the capital-recurrent budget was mainly due to the front-loading of 12th Plan activities and reprioritisation of development activities in the wake of the Covid-19 pandemic.

The reversal in the ratio between the capital budget and the recurrent budget, he said, was reasonable given the need to meet recurrent expenditure from the domestic revenue, which has taken a hit due to the Covid-19 situation.

The recurrent expenditure as per the Constitution has to be met from the domestic revenue.

In the 2019-20 fiscal year, the ratio of the capital expenditure to recurrent expenditure was 44 to 56 percent.

The overall budget, the finance minister said, will see a significant increase mainly due to an increase in the capital budget. Last year, the total annual budget was Nu 64.83 billion (B).

Lyonpo Namgay Tshering said that there would be “a little decline” in the recurrent budget because of the decline in the domestic revenue. “Now with the Covid-19 pandemic, the domestic revenue is impacted as there are no receipts from the tourism sector,” he said.

According to forecasts of various agencies, the GDP growth in 2020 will decelerate in the range of 2.2 to 2.9 percent from the earlier projection of 6.5 percent.

The ministry has completed its homework on the 2020-21 budget. According to officials, the summer session will be called just for passing the budget.

The finance minister said that the government would resort to “optimization of budget”.

“For instance, in order to achieve something worth Nu 50 we have been spending Nu 100 till now. Now, it will be just the opposite, which means that there will be some optimisation of the recurrent expenses,” he explained.

However, he added that the government would re-look into the budget when the revenue performance improves.

Lyonpo Namgay Tshering said that the international assistance received for Covid-19 response programmes will also form a part of the annual budget.

So far, international agencies like the World Bank, Asian Development Bank and SAARC Development Bank, combined have committed to provide about USD 30 million (M) to help Bhutan’s Covid-19 response efforts.

Among other purposes, the assistance would be used to fund livelihood support programmes and relief measures for vulnerable groups, including displaced employees, unemployed people actively seeking employment, and self-employed individuals in the informal sector.

The country has not received monetary assistance from bilateral development partners, which are also grappling with the Covid-19 situation although some countries have provided assistance in kind, according to officials.

However, officials said that development partners have come forward to assure Bhutan of assistance in the wake of the pandemic.

The finance minister said that the country’s biggest development partner, India, has assured some degree of flexibility in terms of the use of the 12th Plan commitment based on priorities. India has committed Nu 45 billion (B) for the 12th Plan.

“All the multi-lateral and bilateral development partners and donors have been very cooperative and instrumental in supporting the government’s effort in containing Covid-19,” the finance minister said.

Lyonpo Namgay Tshering said that the Covid-19 related funds under the PMO would be a part of the Nu 30B national resilience fund (NRF) and not a part of FY 2020-21.

The national resilience fund is independent of the annual budget or the 12th Plan.