Thukten Zangpo
The National Assembly yesterday endorsed the Economic and Finance Committee’s (EFC) 15 recommendations out of 16 on the budget appropriation Bill for fiscal year 2024-25 and supplementary budget appropriation Bill for fiscal year 2024-25.
The adoption of the Bills will be held today.
The chairperson of the EFC, Bartsham-Shongpu MP Rinchen Wangdi, presented 16 recommendations to the House.
As proposed by the finance ministry, the members supported the supplementary budget incorporation of Nu 3.22 billion for the fiscal year 2024-25.
On EFC’s recommendation for an additional allocation of Nu 140.4 million for Bhutan Food and Drug Authority (BFDA), the House directed the EFC to review it further and report to the House today after the members expressed concerns about capping the budget or possibility of including it in the supplementary budget.
This allocation was to enhance the capacity of the National Food Testing laboratory and improve the certification services for facilitating export and import of food and food products.
For the fiscal year 2024-25, the BFDA is provided with a capital budget of Nu 73.86 million. In the 13th Plan, the GDP contribution of the agriculture and livestock sector is estimated at Nu 50 billion.
Supporting the increase in capital budget, Finance Minister Lekey Dorji said that Nu 645.7 million was earmarked for BFDA in the 13th Plan and the government allocated Nu 73.86 million or 12 percent in the fiscal year from the proposed budget of Nu 82 million.
The House also supported the EFC’s recommendation for the government to carry out feasibility studies and business viability of crops under commercial farming like Chirup, commercial, and peri-urban farming under the ministry of agriculture and livestock.
The recommendation also stated that if the projects prove viable, the government should develop clear plans for production, processing, logistics, and marketing, ensuring all stakeholders have defined responsibilities and accountability.
For Chirup farm, the government must provide equity injection directly to Farm Machinery Corporation Limited to fix accountability and accord ownership of the Chirup commercial venture, it added.
For the fiscal year 2024-25, the government has allocated Nu 346.5 million—Nu 324 million for Chirup farm, Nu 15.5 million for commercial farming of asparagus, broccoli, chilli, and beans, and Nu 7 million for urban and peri-urban farming.
Gangtokha in Dagana and Zomlingthang at Samdrupjongkhar are the two identified places for Chirup farm.
The MPs expressed their concerns on the accessibility of markets for the sale of agricultural products.
Agriculture Minister Younten Phuntsho said some of the failures of such farms were mostly because of lack of proper guidelines.
He added that the Gyalsung centres and Gelephu Mindfulness City would be a market for the supply of vegetables from these farms.
Lyonpo said that the farms would use high-tech machinery and drones, and even house sports centres.
Based on the importance and estimated risk of human-wildlife conflict, the committee recommended identifying dzongkhags based on their importance for allocation of Nu 45 million for the construction of chain-link fencing projects.
In the fiscal year 2024-25, Nu 45 million was allocated for the construction of chain-link fencing in five project dzongkhags.
The House also agreed to give authority to the department of energy for implementation, ownership and maintenance of installation of solar panels in schools.
According to the budget report, the installation of solar panels in 20 different schools is planned under project-tied assistance, with an additional allocation of Nu 19.88 billion budgeted for the Ministry of Education and Skills Development.
The EFC’s recommendation also included the government to offload the allocation of Nu 77.05 million under CARLEP loan financing for Kofuku International from the national budget and transfer the debt liability to Druk Holding and Investments with proper accounting treatment as on-lending from the government.
NA members endorsed the committee’s recommendations to prioritise dzongkhags and regions with less access to high-quality roads with double lanes and other roadside amenities.
Additionally, Nu 867.38 million allotted for development and maintenance of dzongkhag roads to be specified with location and detailed activities to be carried out in a year under the road sector.
The House supported the government to drop the budget allocation of Nu 25.99 million for Green Bhutan Corporation Limited from the national budget in keeping with the requirements of forming state enterprises stipulated under chapter 5 of the Public Finance Act 2007.
The House also supported the EFC’s recommendation to come up with the guidelines for project-tied grants. The guideline to be shared with the EFC for necessary review and to report to the House.
Under the project-tied grants, Nu 14.85 billion, 18.6 percent of Nu 80 billion for 13th Plan, was allocated for the fiscal year 2024-25.
The EFC’s chairperson noted that such grants are associated with risks such as disparity, misappropriation, and underutilisation of project-tied funds.
He said that the government should establish suitable guidelines for allocating project-tied grants to maximise returns on investment, while also addressing the requirements of regional development as outlined in the Constitution.
The EFC also recommended that the government maintain a fiscal deficit of less than 3 percent of GDP in the first year and gradually smooth it out in subsequent years.
The House supported the establishment of proper mechanisms by the government to ensure optimal utilisation of the capital budget. It said that depending on the implementation capacity of the budgetary bodies, the government may consider adjusting the capital budget accordingly.
It was found that about 20 percent of the capital budget remained underutilised every year because of lack of human resource.
The majority of members also endorsed the proportional budget allocation for human resource development and research and development in the fiscal year, amounting to one percent of the GDP (Nu 7.1 billion) for the 13th Plan.
The committee’s recommendations also included instituting appropriate measures to mitigate inflation risk in the country.
Finance minister said that the experts had projected inflation between 4-5 percent in the 13th Plan.
The EFC also recommended the government to closely liaise with the Royal Monetary Authority and explore new ways to manage excess liquidity to avoid negative impact on the economy.
The EFC chairperson, Rinchen Wangdi, said that there was excess liquidity of about Nu 10 billion in the market and was estimated to increase to about Nu 13.5 billion in the fiscal year 2024-25.
Clarifying on this, Finance Minister Lekey Dorji said that current excess liquidity stood at Nu 5.6 billion which was Nu 42.9 billion during the pandemic.
With the lifting of moratorium on housing and construction loans by July 1, 2024 and the moratorium on import of vehicles by August 18 this year, Lyonpo said that excess liquidity could be managed.
Due to Bhutan’s heavy dependence on imports, which constitute approximately 80 percent of its goods and pose risks to international reserves, the committee advised the government to prioritise export promotion and import substitution. This approach aims to mitigate potential adverse effects on the international reserve.
Lyonpo Lekey Dorji said that the international reserves was at USD 608 million as of June 20 this year, adequate to meet 15.7 months of essential imports.
He further noted that the commissioning of Punatshangchhu-II on August 15, along with government initiatives to attract foreign direct investments, Nu 15 billion economic stimulus programme, grants amounting to Nu 85 billion in the 13th Plan, and contributions of Nu 40 billion from bilateral partners and multilateral development banks, will enhance the country’s reserves.
The House also endorsed the committee’s recommendations for the government to accommodate inflation adjustments in the recurrent budgets of all budgetary agencies, crucial to enable these agencies to fulfil their responsibilities effectively and efficiently.