The Ministry of Finance’s recent notification that allows procuring agencies and contractors to defer project completion deadline is expected to affect the government’s capital budget utilisation plans and the current fiscal targets.
However, to offset the impact of the Covid-19 on budget utilisation plans, Finance Minister Namgay Tshering said the government was working on amending the Construction Development Board’s rules that allow a contractor to take up a maximum of five works at a time.
Lyonpo said that the amendment of the rules would help the government execute more projects within a short period. “There are contractors who are capable of handling more than five projects at a time,” he said, adding that the change will provide a be a win-win situation for contractors and the government.
Proprietor of Bhutan Construction Pvt. Limited, Ugyen Tshering, said that it would be helpful for contractors with the capacity to handle more peojects.
The government’s strategy to offset the impact of the Covid-19 by ramping up the government spending suffered another hiccup with the imposition of the second nationwide lockdown from December 22 last year. The low budget utilisation rate has been a concern for the government, as only about 6 percent of the current fiscal year budget was utilised in the first quarter, according to MoF.
According to the finance minister, the capital budget utilisation in the second quarter increased to 23 percent. The total capital budget for the current fiscal year is 36.25 billion (B).
The finance ministry’s notification on contract re-scheduling states that no penalties will be levied on the delay of projects that have been caused by the Covid-19 containment measures. It states that disruptions like the closure of the international border and the nationwide lockdowns in August and December 2020 impaired the fulfilment of contractual obligations.
But the notification adds that projects that are not affected by the pandemic and the ones that can be completed on the initially set deadline will be not be re-scheduled.
Finance Minister said the government would not be able to spend as per the plan and that the projects must be carried forward to the next fiscal year.
“There will be some impact on budget utilisation because the work needs to be deferred if its progress is affected by the Covid-19 containment measures. In such cases, if the contractors are asked deliver on time the work quality will be hampered and the value for money won’t be there,” he said.
He said that the government was trying to make further adjustments in the 12th Plan and the current fiscal year budget. However, he said that the 12th targets would not be affected in terms of budget utilisation, as works would be prioritised depending on how the Covid-19 situation evolves.
He said that projects expected to be delayed were the ones that require expertise and materials from outside.
“Otherwise, it [the Covid-19 situation] is not going to hamper the 12th Plan targets because reprioritisation exercise will help us divert the money to projects that don’t require much foreign expertise and materials. Locally available materials and workforce would be used,” he said.