By Tandin Wangchuk
The Finance Minister presented the National Budget for the FY 2021-22 along with the budget expenditure of the previous fiscal year this week in the ongoing National Assembly session.
The budget for the Financial Year 2021-22, is formulated with the theme to ensure “Sustained Economic Stability for a Resilient Recovery” and that the Government pursues an expansionary fiscal stance with the overall objective to maintain Public confidence and sustain economic activities among others.
Additionally, it also looks at transforming the Health and Education system, leverage on ICT and Innovation, and Enable Reform Initiatives among a host of other intended targets.
The Minister informed that the FY 2021-22 budget is a milestone as it captures the essence of the Royal Kasho for Civil Service and Education Reforms and provides budget to embark on the reform initiatives.
The Budget Appropriation Bill for the Financial Year 2021-22 is tabled for a sum not exceeding Nu. 80,483.150 million which includes the current expenditure of Nu. 35,598.664 million, Nu. 38,320.671 million capital expenditure, Nu. 5,654.415 million for repayment, and Nu. 909.400 million for on-lending.
The Supplementary Appropriation Bill for the Financial Year 2020-21 amounting to Nu. 2,783.703 million was also tabled.
During the FY 2021-22, the domestic revenue is estimated to grow by 7% from a drop of -8% in the previous FY. Domestic revenue is estimated at Nu. 35,600 million of which 64% is tax revenue and 36% is non-tax revenue.
The positive revenue projection is based on the expected increase in tax revenues mainly attributed to improved direct tax performance and the indirect taxes such as sales tax, domestic excise duty, and green tax are also expected to grow proportionately.
The House referred the Bills to the Economics and Finance Committee for further deliberation. The Committee is scheduled to report back its finding and recommendation to the House on 8th June 2021.
Earlier on May 25, the Finance Minister, Lyonpo Namgay Tshering, presented the National Budget (Appropriation Bill 2019-2020) and the report on the budget of the previous Fiscal Year to the National Assembly.
The Finance Minister reported that the main objective of the budget is to ensure economic growth and stability and as a means to achieve the objectives of the 12 FYP.
Reporting on the Annual Budget for the FY 2019-20, the total resource estimate was reported at Nu. 54, 619.179 million with a total estimated expenditure of Nu.61,197.307 million. Fiscal deficit was reported at 3.04% of the GDP.
The Supplementary Appropriation for the FY 2018-19 was submitted for Nu. 1,627.410 million and the revised budget amounting to sum not exceeding Nu. 49,325.539 million upto period ending March 2019.
The Budget Appropriation for the FY 2019-20 is for a sum not exceeding Nu. 64,826.725 million and the funds for the appropriation would be drawn from the Consolidated Fund of the Royal Government of Bhutan.
The Finance Minister reported that the government had introduced new initiatives in education and health sector by removing cut off points for the class X and introducing scholarship for class X students, introduced Day feeding program in a 115 rural school and started implementation of Flagship Programs.
The government has also made major reforms to strengthen the public finance management by introducing new systems. It is also looking to broaden the tax base.
It was decided that the Economic and Finance Committee will review the Budget Report and submit its Review Report to the House after 10 working days.
National Budget Report FY 2021-22
The National Budget Report outlines that in order to respond to the challenges posed by the pandemic, the budget for the Financial Year 2021-22 has been formulated with the goal to ensure ‘Sustained Economic Stability for a Resilient Recovery’ underpinned by five broad objectives of Maintaining Public Confidence, Sustaining Economic Activities, Transforming Health and Education System, Leveraging on ICT and Innovation, and Enabling Reform Initiatives.
“For the first time, the Government has provided capital budget without ceiling at the agency level. Such reform facilitated the agencies in receiving adequate budget for supporting priority activities for a resilient economic recovery,” it states.
It further states that the system of providing Annual Grants to the LGs and Block Grants to other Budgetary Bodies shall be continued during the FY as it promotes ownership with flexibility and accountability.
Further, considering the revenue performance and the constitutional requirement of having to meet the recurrent expenditure from internal resources, the government has adjusted the recurrent budget within the estimated domestic revenue.
Additionally, in order to simplify and fast track procurement during the pandemic, the Government has issued Simplified Procurement Rules and Regulations (SPRR) supported by e-GP. Further reforms will be implemented to ensure procurement system and rules remain relevant and user friendly with changing times.
“As the pandemic continues to impact health and livelihood and to prepare for any eventualities, the Government has earmarked a budget of Nu. 3,000 million, of which Nu, 2,000 million has been kept under General Reserve and Nu. 1,000 million is being mobilized to support quarantine, COVID-19 test kits, PPE, vaccines among others,” it states.
The report further states that the Government has strengthened and deepened the linkage between the budget and Annual Performance Agreement (APA) through a rigorous process which will be further sharpened and upscaled in the future budget.
Economic Performance and Outlook
The economy experienced largest contraction in 2020 triggered by the COVID-19 pandemic. The growth is expected to drop to an all-time low of -6.3 percent as output from tourism-related services, construction, and manufacturing sectors deteriorated.
The severity of the impact was largely offset by exceptional performance in the electricity sector with substantial increase in export earnings in 2020.
The grant of Druk Gyalpo’s Relief Kidu in the form of income support to individuals directly affected and interest payment support to individual borrowers and business entities, along with fiscal and monetary measures, effectively mitigated the adverse impact to a large extent.
However, as the risk of new infection heightens in the region and with the detection of community transmission and subsequent lockdowns in the border towns, economic recovery might be slower than anticipated.
The current developments are likely to exacerbate the risk of prolonging the economic downturn. Amidst such uncertainties, the FY 2021-22 budget aims to ensure ‘Sustained Economic Stability for a Resilient Recovery.’
As per the IMF estimates (April 12, 2021), the global economy in 2020 is estimated to contract to -3.3 percent, lower by 6.1 percentage points than 2019.
Whereas, with the anticipated availability of vaccines by summer 2021 and additional fiscal stimulus in a few large economies, the global growth is projected to rebound to 6.0 percent in 2021 and 4.4 percent in 2022.
For emerging and developing countries, the growth forecast in 2020 is -1.0 percent and projected to grow at 8.6 percent in 2021 and 6.0 percent in 2022, reflecting a stronger than expected recovery for larger economies like China and India.
National Budget Financial Year 2021-22 5 With an estimated 8 percent contraction in 2020, the IMF has projected the Indian economy to rebound with growth estimates of 12.5 percent in 2021 and 6.9 percent in 2022 as economic activity normalizes, helped by strong policy support.
“However, the recent surge in virus cases in India due to the second wave is likely to slow down the anticipated economic recovery. The growth prospects therefore, remains highly volatile and uncertain,” it further adds.