The country will not be able to achieve self-reliance, which is one of the main themes of the 11th Plan.
“Self-reliance and inclusive green socio-economic development,” the overarching objective of the 11th Plan is dampened by delays in commissioning of three new hydropower projects.
This was highlighted in the 13th Round Table Meeting that concluded yesterday. Prime Minister Tshering Tobgay in his concluding remarks also acknowledged that in the era of interconnectedness and irreversible globalisation, to say that one is self-reliant is a sort of arrogance.
As per the Plan document, self-reliance is defined as the ability to meet all national development needs articulated through Five-Year Plans by 2020.
Energy security, fiscal balance and food self-sufficiency are the key instruments to realise self-sufficiency.
However, the three new hydropower projects that are supposed to add another 2950MW of power to the existing 1606MW in the 11th Plan have been deferred to the 12th Plan.
While this target will not be met, the implications cascades onto the fiscal balance. Because the fiscal targets are projected based on estimated earnings from the hydropower projects, the delays affects the fiscal balance.
The target in the 11th Plan was to generate about 80 percent of the country’s expenditure on its own. Currently it is only 65 percent. This means that the country is still donor dependent, as the remaining 35 percent of the expenditure has to be met through grants and loans.
In terms of food self-sufficiency, the target was to achieve at least 75 percent of national food self-sufficiency, which includes cereals, vegetables, dairy products and meat. Although the current rate is about 70 percent, the self-sufficiency rate of rice, the staple diet is only around 50 percent. “This is a concern,” said the Gross National Happiness Commission secretary Thinley Namgyel.
“The fact that the country will not be able to achieve self-reliance in the 11th Plan reflects our economic vulnerability,” he said.
In fact, it was the hydro debt that contributed to the debt to GDP ratio of 113 percent in the last fiscal year.
The finance secretary, Nim Dorji said more than 70 percent of the external debt is attributed to the hydropower projects, which are highly viable.
Should the hydropower projects commission as scheduled within the 12th Plan, he said that the external debt stock could decrease to 50 percent of GDP.
The delay, he said had resulted in a downward revision of domestic revenue in the 11th Plan. This had a direct impact causing a downward revision of current expenditure.
He said that increase in grants has helped in maintaining the fiscal balance of the country.
The fiscal balance without donor support, he said, will turn out to be high, and for the government to maintain the fiscal balance below 3 percent of GDP, loans and grants will play a critical role even in the 12th Plan.
With regard to inclusiveness, another 11th Plan objective, the GNHC secretary highlighted that the country is well on track to reduce multi-dimensional poverty. In fact the country was able to half multi-dimensional poverty.
However, the result of income poverty and Gini coefficient will be known only after the conduct of the population and housing census and the living standard survey later this year.
The target was to reduce the income poverty from 12 percent in 2012 to less than 5 percent by 2018.
Good progress has been made in terms of other parameters to achieve inclusiveness, such as education enrollment, gender parity, stunting, immunisation, infant mortality rate, access to improved drinking water and sanitation, among others.
The “green” element is also well on track as the country absorbs three times more carbon emissions than it produces, while the country has 71 percent of forest coverage against the Constitutional mandate of 60 percent.
“Economic diversification and financial inclusion is the key to achieve macro-economic stability,” said Nim Dorji. He also announced that the government is looking into the possibility of introducing a goods and services tax (GST) to broaden the revenue base.
He said the economic stimulus plan of Nu 5B has helped increase the domestic productive capacity.
With the commissioning of the hydropower projects, the current account balance of the country is also expected to improve.
The introduction of minimum lending rates through monetary policy, he said, will also provide greater access to finance while making financial institutions competitive.