…𝒕𝒉𝒆 𝒕𝒐𝒕𝒂𝒍 𝒑𝒖𝒃𝒍𝒊𝒄 𝒅𝒆𝒃𝒕 𝒔𝒕𝒐𝒄𝒌 𝒊𝒏 𝒕𝒉𝒆 𝒇𝒊𝒔𝒄𝒂𝒍 𝒚𝒆𝒂𝒓 2022-23 𝒊𝒏𝒄𝒓𝒆𝒂𝒔𝒆𝒅 𝒃𝒚 8 𝒑𝒆𝒓𝒄𝒆𝒏𝒕 𝒕𝒐 𝑵𝒖. 20,101 𝒎𝒊𝒍𝒍𝒊𝒐𝒏 𝒇𝒓𝒐𝒎 𝒕𝒉𝒆 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒇𝒊𝒔𝒄𝒂𝒍 𝒚𝒆𝒂𝒓.
By Phurpa Wangmo
The total budget for the fiscal year 2023-24 is maintained at Nu. 74.86 billion, representing a 7.6 percent increase compared to the fiscal year 2022-23. Out of this total expenditure, Nu. 45.55 billion is allocated to the current budget, and Nu. 29.32 billion is designated for capital expenditure.
Based on provisional figures, the fiscal deficit is expected to improve from 7.9 percent of GDP in the fiscal year 2021-22 to 4.8 percent of GDP in the fiscal year 2022-23. This improvement is attributed to a 10 percent increase in revenue mobilization.
However, for the current fiscal year 2023-24, the fiscal deficit is estimated to widen to 9.9 percent of GDP due to reduced grant estimates. The fiscal deficit of Nu. 21,837 million is anticipated to be financed through domestic and external concessional borrowings.
According to the State of the Nation’s report, the total public debt as of June 30, 2023, amounted to Nu. 276,976 million, equivalent to 136.8 percent of GDP. This debt is composed of Nu. 244,186 million in external debt, accounting for 120.6 percent of GDP, and Nu. 32,790 million in domestic debt.
The total public debt stock in the fiscal year 2022-23 increased by 8 percent, reaching Nu. 20,101 million compared to the previous fiscal year. This increase is primarily attributed to higher domestic debt, which accounts for 11.8 percent of the total public debt stock. The rise in domestic debt is mainly due to the issuance of new government bonds, the use of Ways and Mean Advances (WMA), overdraft facilities, and treasury bills for cash management and financing. The hydropower debt as of June 30, 2023, amounted to Nu. 168,648 million, representing 69.1 percent of the total external debt and 83.3 percent of GDP. This hydropower debt comprises six hydropower projects: Mangdechhu, Puna-I, Puna-II, Nikachhu, Dagachhu, and Basochhu.
Non-hydro debt stood at Nu. 75,538 million, accounting for 30.9 percent of the total external debt and 37.3 percent of GDP. In the medium-term, it is expected that public debt will remain elevated, primarily due to hydropower disbursements, the inclusion of several upcoming small hydropower plants, and budgetary borrowings to bridge the resource gap.
The current account balance (CAB) is estimated to widen from 33.9 percent of GDP in the fiscal year 2021-22 to 34.5 percent of GDP in the fiscal year 2022-23, primarily due to an expanding trade deficit. With the normalization of the economic sector, trade flows have significantly increased, leading to a larger trade deficit. Although the CAB is expected to moderate, it is projected to remain higher than in the fiscal year 2020-21 in the medium-term.
In the fiscal year 2022-23, total resources mobilized reached Nu. 59.89 billion, reflecting a 10 percent increase compared to the fiscal year 2021-22. Domestic revenue accounted for 73.1 percent of total resources, while the remaining 26.9 percent came from grants and other receipts. Domestic revenue for the fiscal year 2022-23 amounted to Nu. 43.81 billion, marking a 12.2 percent growth, driven by a 13.3 percent increase in tax revenue, primarily from improved collection in corporate, business, and personal income and sales tax. Total external grants reached Nu. 14.93 billion, a 7.8 percent increase from the previous fiscal year.
For the current fiscal year 2023-24, total resources remain as budgeted at Nu. 53.02 billion, representing an 11.5 percent decrease compared to the previous fiscal year. Domestic revenue is estimated at Nu. 46.23 billion, and total external grants remain at Nu. 6.78 billion, primarily due to the conclusion of the 12th five-year plan.
On the expenditure side, total expenditure increased by 0.3 percent in the fiscal year 2022-23, reaching Nu. 69.58 billion. Recurrent expenditure grew by 2.9 percent to Nu. 35.43 billion, while capital expenditure decreased by 2.8 percent, dropping from Nu. 34,712 million in the fiscal year 2021-22 to Nu. 33,750 million in the fiscal year 2022-23.
In 2023 (January-June), overall imports amounted to Nu. 57.2 billion, reflecting a 3.1 percent increase compared to the same period in 2022. On the other hand, overall exports as of June reached Nu. 18.7 billion, indicating a 7 percent increase. If this trade pattern persists, it is projected that by the end of 2023, the total import value will reach Nu. 113.0 billion, while exports will only reach Nu. 36.5 billion. Given the significant increase in imports compared to exports, the trade deficit is expected to continue expanding.
As a result of the persistent widening of the CAB and lower financial inflows, the gross international reserves have depleted. As of June 2023, the Indian Rupee (INR) reserves stood at 6,794.5 million, and convertible currency reserves reached USD 500 million. The decline in the reserve position is primarily attributed to increased imports without a corresponding rise in exports, ongoing inflationary pressure, and the depreciation of the local currency against the US dollar.
In the short to near medium term, the reserve position is expected to strengthen due to several measures, including a temporary halt on specific imports, adjustments to tax policies, the introduction of revised property taxes, recent changes to the tourism levy, and increased incentives for inward remittances.