Despite the loss of revenue from the ripple effect of goods and services tax (GST) in India and delay in hydropower construction, the government is making efforts to reduce fiscal deficit for the 11th Plan below three percent of the GDP.
A fiscal deficit occurs when government’s total expenditure exceeds its revenue and grant combined. This resource gap is usually covered from the borrowing. As per the budget report 2017-18, a deficit of Nu 4.8B is expected at the end of last fiscal year of the Plan.
Panbang MP said that the World Bank and Asian Development Bank had estimated a much higher deficit due to impact of GST, delay of hydropower projects, and other economic problems. During the question hour on November 24, he asked the finance minister to update the house on the actual estimate of the budget deficit.
Finance Minister Namgay Dorji said that the current account deficit is expected to improve from 25 percent in 2012-13 to 21 percent in 2017-18. This, he said, was because the government was able to make up for the revenue loss from other sources.
He said that the GST impact was estimated at about Nu 1B for 2017-18 fiscal year. Even with the reduced size of excise duty refund from the Government of India due to GST, he said the government would still be getting an excise refund of Nu 3.03B in the last fiscal year of the Plan.
In addition, surplus transfer from RMA has been increasing every year.
For the three consecutive fiscal years, from 2012-13 to 2014-15, he said no surplus transfer had been recorded from the RMA because it did not make any profits.
In 2015-16, RMA’s surplus transfer was recorded at more Nu 700M, which is Nu 500M more than the estimated. Even in the following fiscal year, RMA’s surplus transfer was Nu 375M more than estimated amount of Nu 500M.
As for the loss in hydropower revenue of Nu 11B due to delay in construction, Lyonpo said that the country was able to generate Nu 10B from the grants (5B as a economic stimulus package from the GoI and another 5B from external grants). The remaining, he said, was made up from the revision in taxes.
Lyonpo Namgay Dorji assured that the government was doing everything to maintain budget deficit below Nu 4.8B by the end of FY 2017-18 as reported. Today, he said, the fiscal deficit is maintained at 1 percent of GDP and the government could maintain it at two percent.
Drametse-Ngatshang MP Ugyen Wangdi also questioned the economic affairs minister on the government’s pledge to formulate a comprehensive private sector development plan.
Lyonpo Lekey Dorji said that the government implemented various plans and programmes for the development of the private sector. Under the Nu 5B economic stimulus plan he said the country was able to address the rupee problem and helped in promoting cottage and small industries.
The regulatory reforms, he said, resulted in improvement of Bhutan’s ranking in the World Bank’s ease of doing business from 145 in 2013 to 75.
“The government has also introduced many fiscal incentives, reviewed many policies pertaining to mining, hydropower, domestic electricity tariff, public private partnership and licensing policies to name a few,” he said.
Development of basic infrastructure, road networks, reduced interest rates, introduction of G2C and G2B services, and mini dry ports, he said, would benefit the private sectors.
Bumdeling-Jamkhar MP Dupthob questioned government’s pledge to allow external commercial borrowing for the private sector.
Finance Minister, however, said that the government in consultation with the RMA and other stakeholders issued an external commercial borrowing guidelines in 2010 and was revised in 2012.
He said, so far, Mountain Hazelnut Ventures, Bhutan Ventures Hospitably Pvt Ltd. and Yangphel Private limited availed financing though external commercial borrowing from banks outside, including International Finance Corporation (IFC).