Block grants unaffected by re-prioritisation exercise

MB Subba 

The government wants to keep the economy ticking over during the Covid-19 pandemic by boosting public spending, but there are challenges as the strategy is faced with not only budgetary constraints but also lack of skilled labour.

The domestic revenue has decreased while the pandemic has opened floodgates for expenditures, budgets for which were not allocated initially.

Secretary of the Gross National Happiness Commission (GNHC), Thinley Namgyel, in an interview with Kuensel said, “Our resources are limited. We have to use them in the areas that gives us the best results.”

The country has availed soft loans of nearly Nu 3 billion (B) from the World Bank (WB) and the Asian Development Bank (ADB), according to him. But he added that availing grants was challenging as the pandemic had affected almost every country.

Before the 21-day lockdown in August, the estimated domestic revenue in the fiscal year 2020-21 was Nu 33B, which was a 14 percent decline from the previous fiscal year. The revenue may have decreased further after the lockdown.

The GNHC secretary said that the government had no option but to defer some of the activities that are relatively less important. He said that reprioritisation of activities was not a one-time exercise and that some of those deferred activities could be brought back towards the end of the 12th Plan depending on how the Covid-19 situation evolves.

However, the GNHC secretary said that the allocation of block grants has not been affected by the reprioritisation exercise.

“Block grants are provided by the centre and it is for the Dzongkhag Tshogdu and the Gewog Tshogde to decide where they want to put the money as per the local government Act,” he said.

But he added that the GNHC was requesting local governments to prioritise food security, health, education and activities such as job creation that would enhance the local economy.

Asked if the overall budget ceiling would decrease with the re-prioritisation exercise, the GNHC secretary said, “There’ s no chance of increasing the budget (from the previously allocated estimations). But we are trying to maintain at the same level at the moment.”

The capital budget for the 12th Plan is Nu 116 billion (B). For the current fiscal year, the recurrent and capital budget allocations are Nu 32.9B and Nu 36.25B respectively, excluding the allocation for principal repayment and on lending.

To bridge the fiscal gap, the government has offered bonds worth Nu 3 billion (B) with a maturity period of three years for public subscription for the first time.

The government is expected to issue more bonds of the maturity period ranging from three years to seven years during the fiscal year 2020-21.

According to the finance ministry, the main objectives of issuing the bonds include creating opportunities for domestic investors and domestic liquidity management during liquidity shortfall in the economy. Earlier in August, the government also offered Treasury Bills (T-Bills) worth Nu 3 billion (B) for sale.

The GNHC secretary said that the construction sector would receive the government’s priority.

However, he highlighted the issues in getting skilled workers in implementing the activities. Many Indian workers have expressed their desire to return to their homes amid the pandemic while some have already left.

The only Covid-19-proof economic bedrock was the hydropower sector, from which revenue had increased by 14 percent as of August, according to the Druk Green Power Corporation Limited.

When the government presented the annual budget 2020-21 in Parliament, the GDP projection for the year was 1 percent. Post-lockdown, the GDP growth projection for 2020 has been revised downward to negative 2.1 percent.