… 40-50 percent budget reduced for agencies

Thukten Zangpo

The government cut the recurrent expenditure from the last fiscal year 2021-22 to spend the limited domestic resources judiciously, Finance Minister Namgay Tshering said.

About 40 to 50 percent of the budget was cut across all agencies in the fiscal year 2022-23 compared to the pre-pandemic. The finance ministry itself saw a cut in the budget by about 60 percent.

“The government’s budget is constrained and we do not have the luxury to spend more,” he said.

In this fiscal year 2022-23, the government revised the total budget to Nu 76.75 billion (B) while the estimated domestic resources amounted to Nu 53.86B as of September.




The recurrent budget was Nu 36.44B or about 47 percent and Nu 40.31B or 53 percent for the capital budget.

Not compromising the mandatory expenses, Lyonpo said that the government has to look for curtailing the controllable expenses to observe more prudence unlike in the past. 

The budget released was activity-based in the earlier years.

“We are testing how the agencies can manage with the limited pool of resources prudently,” he said, adding that budgets are allocated as block grants in consultation with the agencies.




Lyonpo said that the agencies are provided with a fair share of the budget and it depends on individual agencies to manage with limited resources. “Even with the cuts in expenditure, we are managing.”

The finance ministry in the budget call notification asked the budgetary bodies to take proactive measures to review and spend every amount of monies allocated wisely, exercise prudence with strong financial discipline to avoid cost overruns, and unnecessary spending, prevent financial leakages and drive cost efficiencies and productivity savings in all expenditures.

Lyonpo said that about 92 percent of the recurrent expenditure is spent on mandatory expenses-salary and wages, medical referral cases outside the country, purchase of medicines, and debt servicing.

He added that 60 percent is incurred on salary and wages, Nu 5B for debt repayment, and Nu 2B for the purchase of essential medicines.

While the remaining 8 percent at around Nu 3B to Nu 3.5B every year, Lyonpo said goes as the controllable expenses to 34 autonomous agencies, 4 constitutional offices, 10 ministries, 20 dzongkhags, 205 gewogs, judiciary and as operational subsidies to the state-owned enterprises.




The controllable expenses that include operation and maintenance, electricity and water bills, vehicle maintenance and fuel could be curtailed, he said.

Lyonpo said that Bhutan’s revenue source is conventional with Nu 11.5B earnings from the hydropower sale proceeds of the fiscal year 2021-22, Nu 21B from tax collection, and Nu 5B as dividends from the Druk Holding and Investments.

The hydropower sales are offset by Nu 10.8B fuel import, he added.

As in the past, Lyonpo said that with every completion of the hydropower projects in the country, there was a salary revision. “Suppose there was a breakdown in hydropower projects, it would be difficult to pay the salary. There was a fundamental issue in managing the resources.”

The Constitution mandates the cost of recurrent expenditure to be met from the internal resources of the country.




With the pandemic, Lyonpo said that it was challenging for the country because of very minimal revenue against the expenditure as most being mandatory.

However, he said Bhutan did not default on the loan repayment unlike other countries of the same economy size.

Growing recurrent expenditure to capital

Bhutan has seen growing recurrent expenditure as compared to the capital expenditure since the start of the country’s five-year plan.

To reverse this trend, Lyonpo said that the capital budget estimated at Nu 116B or about 37 percent of the total budget outlay of Nu 310B was increased to 53  percent in the 12th five-year plan. The estimated recurrent budget during the start of the plan was Nu 193.9B.

“Earlier it was like we are spending Nu 110 for a work of Nu 100. There is operational inefficiency and it does not make any economic sense.”




Lyonpo said that the new constructions that come as capital expenditure are on hold in this fiscal year because there is no benefit out of the expenditure or investment with inflation.

Only about 42 percent (Nu 23.98B) was allocated as capital expenditure in the fiscal year 2019-2020. About 58 percent (Nu 33.02B) was recurrent of the Nu 57B actual expenditure.

In the fiscal year 2020-21, about 51 percent or Nu 32.8B was capital expenditure. The remaining 49 percent or Nu 31.89 was recurrent of the Nu 64.69B total expenditure.

In the fiscal year 2021-22, the capital expenditure allocated increased to Nu 37.89B (53 percent) from the recurrent expenditure of Nu 34.1B. The total budget was Nu 71.99B.