Panbang MP, Dorji Wangdi raised his doubts over the projected budget deficit of Nu 4.8 bn at the end of the financial year as reflected in the Budget report 2017-2018. “Although Nu 4.8 bn has been projected as possible budget deficit for the year, the World Bank and Asian Development Bank has found that the actual budget deficit could be much higher due to impact of the Goods and Services Tax (GST), delay in commissioning the hydro projects and other economic problems caused due to demonetization in India. Please enlighten the house on the actual estimate of the budget deficit by the end of 2017-2018 Financial Year.”
The Finance Minister Namgay Dorji clarified that the budget deficit will not increase for the Financial Year 2017-2018 like many people concluded due to the implementation of Goods and Services Tax by the Indian government. The Finance Minister said that the budget deficit will remain the same at Nu 4.8 bn (2.47%) as projected.
“It also needs to be clarified that the budget projection by the World Bank and Asian Development Bank was carried out for the 12th FYP and not for the financial year 2017-2018.The implementation of the Goods and Services Tax will not affect the projected budget deficit for the financial year because we are yet to claim the excise duty refund for the year 2016,” said Lyonpo Namgay Dorji.
The Finance Minister said that although Nu 3 bn has been reflected in the budget report as excise duty refund for the year 2016, after several rounds of bill tabulation with the counterpart, the refund amount has been settled amicably at around Nu 4 bn. “We might lose around Nu 100 mn from the Sales and Green Tax but we will receive additional funds from the Royal Monetary Authority of Bhutan and we also received assistance from other sources which will make up for the gap after adding up Nu 4 bn from the Excise Duty refund.”
Lyonpo Namgay Dorji said that it is estimated that the government will lose around Nu 14 bn in the 12th FYP over the span of five years without the excise duty refunds from India due to GST. “However, we have already laid out plans to improve the economy of the country and we have decided to pass full benefits of the GST to the public. To be very transparent, in the hydro sector, the government incurred loss of around Nu 19 bn due to delay in the commissioning of PHPA I and II. Fortunately, we received Nu 10 bn as grant (Nu 5 bn from Government of India and Nu 5 bn from foreign donors). From the tax reforms in 2015, the government has around Nu 6 bn.”
He also pointed out that although revenue of Nu 9 bn has been projected from hydro projects in the 11th FYP, the loss of revenue due to delay will not affect the economy of the country as much as it should have due to all the additional funds received from various sources. “The deficit should be maintained at below 3%, so despite the aforementioned drawbacks, we can assure that the government will be able to maintain the budget deficit at 2% after the end of our tenure.”