Bhutan Observer
Cabinet clarifies government stands on opposition PR
Administrator, May 26, 2015

 Yesterday, the Opposition Party issued a Press Release accusing the Government on numerous fronts, by comparing the budget information of Dzongkhags and Gewogs for the first 2 years of the 10th Plan and first 2 years of the 11th Plan and using the outcome as the basis of their argument.

The Press Release seems to have been deliberately timed to pre-empt two events. Firstly, it was issued on the eve of the Finance Minister’s 2015-16 budget presentation to the National Assembly, which actually would have answered many of the points mentioned by the Opposition Party. Secondly, through an amendment of the National Assembly Act in the last Parliament session, there is now a Finance Committee to review the budget. Some of the points mentioned in the Press Release attempts to pre-empt even the responsibilities of this important Parliamentary Committee.

Given these circumstances, there would have been no need for a response from the Government. However, the Opposition Party has used highly incorrect and exaggerated figures to defame the Government. There is also a real danger that the country and the people would be misled into believing the exaggerated information. Hence, the Government finds it necessary and important to inform the nation correctly.

1. The figure of Nu. 4,376.719 m indicated as the total original allocation for the first 2 years of the 11th Plan is completely wrong. The Opposition Party has taken only the civil sector (offices of Dzongdags and Gups) budget of 2013-14 (Nu. 1,171.362m), Gewog Development Grant for one year (Nu. 410m) and the capital budget of the Dzongkhags and Gewogs for 2014-15 (Nu. 2,795.357m. What they have not included is the substantial budget for all other sectors in 2013-14 and the current expenditure budget for 2014-15.

2. The figure of Nu. 14,699.03m as the total allocation for the first 2 years of the 10th Plan seem to be the Revised Budget. Usually, the Revised Budget is much higher than the Original Budget; hence the two cannot be compared.

The correct information based on the accounts audited and certified by the Royal Audit Authority for fiscal years 2008-09 and 2009-10 (first two years of the 10th Plan) and the RAA audited accounts of fiscal year 2013-14 and revised budget of 2014-15 (first two years of the 11th Plan) are given below:

First 2 years of the 10th Plan – All Dzongkhags and Gewogs

Fiscal Year Original Budget Revised Budget Actual Expenditure

2008-09 Nu. 5,479.679m Nu. 6,007.045m Nu. 5,000.215m

2009-10 Nu. 6,928.205m Nu. 8,262.223m Nu. 6,900.426m

Total Nu. 12,407.884m Nu. 14,269.268m Nu. 11,900.641m

First 2 years of the 11th Plan – All Dzongkhags and Gewogs

Fiscal Year Original Budget Revised Budget Actual Expenditure

2013-14 Nu. 9,064.625m Nu. 9,564.174m Nu. 9,064.178m

2014-15 Nu. 8,301.885m Nu. 10,338.687m Not available yet

Total Nu. 17,366.510m Nu. 19,902.861m

The Press Release mentions that the first 2 years’ allocation of the 11th Plan is only 29.78% of the allocation for the first 2 years of the 10th Plan. In actual effect, the first 2 years’ original allocation of the 11th Plan is Nu. 4,958.626m or about 40% higher than the original allocation of the first 2 years of the 10th Plan. Similarly, the revised budget of the first 2 years of the 11th Plan is Nu. 5,633.593m or about 39% more than the revised allocation of the first 2 years of the 10th Plan. The allocations would have been higher by about 50% if activities like the Gewog Connectivity roads (Nu. 779.751m) and School Feeding Programme and Autonomous Schools (Nu. 655.320m) were not kept with the central ministries.

The Opposition Party has also stated that the past two-year’s budget of the PDP Government was characterized by lack of clear economic vision and policy.

This is a serious accusation and criticism not only of the Government but the entire legislative process of budget approval, since the budgets are approved by the Parliament and the Opposition Party is part of that Parliament.

The direction of the economy can be gauged by looking at some key economic indicators. In fact, when the PDP Government took over in August 2013, the economy was in a critical state. In the face of the so called “Rupee crisis”, the nation had been subjected to numerous measures by the previous Government. A number of import restrictions were imposed, access to foreign exchange was controlled, construction activities were indirectly curtailed, there was continued reliance on short-term but expensive Rupee borrowings and worse of all, the Government’s own fiscal measures were far short of expectations. A large number of businesses had to be closed, especially in the automobile sector, where hundreds of Bhutanese workers were suddenly left without jobs. In June 2013, inflation was reported at 8.6%. The fiscal deficit was recorded at 4.1% of GDP, much higher than the usual average. The Labour Force Survey 2013 showed unemployment rate at 2.9%, with youth unemployment at 9.6%. The result of the Government’s failure to handle the Rupee situation and the impact of the various restrictions led to an unprecedented slowdown of the economy.

The NSB reported the lowest ever growth rate of 2.05% in 2013. Non-hydro debt was recorded at Nu. 40,972 million or 40.6% of GDP. Between December 2011 and June 2013, the Royal Monetary Authority (RMA) had to sell USD 400 million to buy Rupees to meet the overall payment obligations. Hence, while the reserves came down to USD 727 million, Rupee balance was built up mostly due to the enhancement of the GoI line of credit by Rs 4 billion in March 2013, and a currency swap arrangement from the RBI for Rs. 5.4. billion in the same month. The RMA had to pay interest charges of Nu. 1,221 million on these borrowings by June 2013.

The PDP Government has been in office for just 22 months. Yet, there is a real improvement in the economy. The restrictions on imports, foreign exchange and construction activities have been lifted much to the relief of the people. As the result of the positive measures taken by the Government, the economy has started to rebounce and it is projected to grow at 6.8% in 2014-15. In March 2015, inflation was reported at 6.3%. In spite of the growing demographics, the unemployment rate has come down to 2.6%, with youth unemployment at 9.4%. For 2014-15, the fiscal deficit is projected at 2.3% of GDP. Non-hydro debt has come down to Nu. 32,357 million or 25.9% in 2014-15, while Rs. 3 billion of the GoI line of credit has been paid off, in addition to the settlement of the RBI currency swap of Rs. 5.4 billion. The latest reserve position is USD 780 million and Rs. 9,379 million.

All these indicators point to the fact that the Government’s economic policies are working and the economy is stabilizing. The successive budgets, contrary to the Opposition Party’s view, continue to meet the objectives of the 11th Plan, in which the country’s plans and priorities are reflected.