Economic and public services allotted the highest share
The government proposed a budget of Nu 60.777 billion (B) for the fiscal year 2017-2018, yesterday. The new financial year begins on July 1, 2017.
Out of this total budget, the government will use Nu 41.84 million (M) for lending and Nu 2.82B for repayment of loans. The rest Nu 57.9B will be spent as government expenditure, 51 percent of which is capital expenditure and 49 percent current.
The new financial year marks the final year of the 11th Plan. The budget, accordingly, has been formulated with the thrust to complete priority activities in achieving the goals of the plan.
Presenting the budget at the National Assembly, Finance Minister Namgay Dorji said the budget aims to fulfill the aspirations of the people and “ensure prosperity for all through wangtse chhirpel”, which is the ruling party’s slogan. “During the last four years, rapid socio-economic development has been achieved,” he said.
The new budget is Nu 6.397B more than last year’s revised budget of Nu 54.38B. This is an increase of 11.7 percent.
This is the largest annual budget of the 11th Plan. This significant increase, the finance minister said, will help the government complete all the ongoing activities within the plan period.
The total income estimated for the financial year is Nu 51.4B. This includes a domestic revenue of Nu 34.7B and external grants of Nu 16.7B.
The budget, which has come a year and three months before the government completes its term, also highlights major activities that will be undertaken during the financial year. The government will complete its term in early August next year.
During the FY 2017-18, major activities including the double-lanning of the East-West highway, the construction of the Gyalpoising-Nganglam highway and black-topping of 42 gewog centre roads, will be completed. The construction of three new hospitals in Tsirang, Gelephu and Haa, which are ongoing, will be completed.
Also, the government will establish three new central schools that will take the total number of central schools to 63. According to the budget report, all domestic airports will be functional and the integrated livestock farm in Samrang gewog of Samdrupjongkhar, will be completed during the financial year.
The government will also initiate construction of a new National Council building and a new Sarpang dzong.
As a new initiative, the government plans to establish an endowment fund for crop and conservation to compensate farmers for crops and livestock lost to wild animals and natural calamities. The government will establish a “stabilisation fund” to maintain stability of the economy.
“Since rural life insurance is one of the most useful resources of support in difficult times, the pay out will be doubled from Nu 15,000 to Nu 30,000,” Lyonpo Namgay Dorji said. Management of rural life insurance scheme will be transferred to Royal Insurance Corporation of Bhutan Ltd.
Recognising the role konyers (caretakers) play in the upkeep of lhakhangs besides performing rituals in the community, the government will pay salaries to all registered caretakers under the Central Monastic Body.
The budget report has also proposed to waive tax for financial institutions on the interest income from lending through the Overseas Education and Skills Development programme. Through this recently launched programme, youth can access loan without collateral to pursue higher education abroad.
“The government will also consider similar other initiatives and support programmes to provide gainful employment to youth entering the job market,” the finance minister said.
The government is committed to reduce income poverty to five percent by the end of the plan period.
The finance minister said the medium term macro-economic outlook for the country is projected to remain sustainable with a higher level of economic growth supported by an accelerated private sector investment. The economy is also expected to experience an improved current account deficit and a low level of inflation.
The budget report forecasts that real GDP will grow by 6.7 percent in the financial year. The main contributor to the growth will be the service sector.
Contribution of the construction industry will fall with completion of some hydropower projects, according to the report. The Mangdechu project is expected to be commissioned in the first half of 2018.
For the financial year, Nu 15.757B accounting for 27 percent of the total expenditure has been allocated to local governments – dzongkhags, gewogs and thromdes. The allocation includes Nu 66M for human resources development, Nu 176M for construction and maintenance of irrigation channels and Nu 363M for rural water schemes to be implemented by local governments.
Further, Nu 864M has been kept aside for construction and maintenance of farm roads.
Tax measures for the financial year have been covered under the Fiscal Incentives 2016, which the government announced on April 4. The government will seek Parliament’s endorsement for implementation of the incentives.
The finance minister said the incentives would come into force retrospectively from January 2016. Among others, the Fiscal Incentives 2016 provides tax exemption for 10 years on convertible currency earnings from export of goods by newly established manufacturing and IT companies.
To accelerate hydropower development and promote alternative energy, the government has allocated Nu 455.558M. Major activities under this sector include preparation of a detailed project report for Kuri-Gongri hydropower project, for which Nu 160M has been allocated.
Further, the government has allocated Nu 30M for on-grid connection of 362 households. Sector wise, economic and public services takes the biggest chunk of the government spending – 34 percent of the total budget, which is Nu 20.7B.