The government’s 2014-2015 budget will see the government spending Nu 37.09 bn of which the current expenditure (salary, fuel, stationery etc) will be Nu 21.89 bn and the capital expenditure (construction of roads, schools, hospitals etc) will be Nu 15.20 bn. This would mean 51 percent for capital expenditure and 49 percent for capital expenditure.
The total resources for the government are Nu 31.95 bn of which Domestic Revenue is Nu 24.59 bn and Grants is Nu 7.36 bn. The domestic revenue is expected to increase by 12.5% from last year. Of the total domestic revenue tax revenue is Nu 17.61 bn and non tax revenue is Nu 6.97 bn. The revenue is expected to increase due to higher collection due to export tariff revision of Chukha, revenue from Dagachu project and Dungsam Cement.
A major feature of this year’s budget is incorporating the civil service pay hike into the current expenditure with Nu 1.8 bn kept aside for that. The report says that the current expenditure has increased by 14 percent from 2013-2014 budget on this account and also due to other factors like increasing cost of maintenance of public infrastructure developed in the past, establishment cost of new departments/divisions and new expenses on the school feeding program.
With the salary revision pay and allowances will now constitute 46 percent of the current expenditure.
The government’s debt which has reached Nu 106.35 bn is expected to touch 138.20 bn by the end of 2014-2015 budget mainly on the account of hydro power loans for Punatsangchu and Mangdechu and projects like Kholongchu and Nikachu being expected to start construction. Hydropower loans are estimated to be Nu 94.61 bn while Nu 10 bn is in rupee loans.
Nu 2.15 bn has been kept aside as annual interest payments mainly for these hydro loans while another Nu 2.91 bn has been kept for paying the principals of these loans also mainly in the hydro sector.
As part of its current budget the government will be providing Nu 1.3 64 bn in subsidies to Royal University of Bhutan, University of Medical Sciences, Druk Air, BBS, BCCI, Bhutan Post, NHDCL and Thromdes of Thimphu, Gelephu and Samdrup Jongkhar.
The report says that the Nu 15.20 bn capital expenditure may increase in size during the years as funds from donors especially the GoI comes in the form of Small Development Project and others. 48 percent of the capital expenditure will be met through external grants and the GoI continues to be the largest donor contributing 65 percent of the total external grants. The next 36% of the remaining grants is provided by all of Bhutan’s other development partners.
The government excluding the 10,000 MW project will be borrowing Nu 1.55 bn for various capital programs and projects. The government also plans to finance Nu 4.80 bn in revenue gap from internal borrowing which will increase the domestic debt.
In terms of sector allocation the largest chunk as usual goes to Education at Nu 6.68 bn followed by Agriculture at Nu 4.31 bn, Health at Nu 3.20 bn, Roads at Nu 2.92 bn, Urban public amenities at Nu 2.23 bn, law and order at Nu 1.84 bn, cultural services at Nu 1.73 bn, energy at Nu 1.01 bn, Trade and Industry at Nu 865 mn and communications at 821 mn.
Under health Nu 210 mn has been allocated for Rural Water Supply schemes with a further Nu 12.16 mn to implement water safety plans. There are also plans to construct various hospitals as well as complete earlier constructions. There is Nu 120 mn for procurement of medical equipment.
In Education Nu 220 mn has been allocated for a centralized procurement and distribution system for giving nutritious diets in schools. A Nu 329 mn budget has been kept for supporting the school autonomy initiative which involves devolving administrative and financial powers to schools. Currently 19 schools are under this initiative. Nu 726 mn has been allocated to RUB to enhance quality and relevance of tertiary education. Nu 393 mn has been earmarked for undergraduate scholarships to over 1,000 students.
Agriculture has allocated Nu 284 mn for improvement and maintenance of farm roads built in the past with another Nu 155 mn for construction of new farm roads. Funds have also been allocated to achieve food self sufficiency in various sectors with Nu 1.5 bn worth of activities to be implemented by Dzongkhags and Gewogs.
Under Trade and Industry Nu 12.65 mn has been allocated to develop a dry port in Phuentsholing and conduct a feasibility study for a dry port in Gelephu. Nu 42.61 mn is being allocated for ancillary facilities in Special Economic Zone of Motanga. Nu 115.76 mn has been allocated for to support tourism promotion related activities.
In energy the major activities include preparing DPRs for Kuri Gongri, Rotpashong and Chamkarchu II and IV and a pre feasibility study for Jomori hydro project.
Under cultural services Nu 200 mn has been allocated for reconstruction of Wangdue Phodrang Dzong and Nu 100 mn for Pemagatshel Dzong.
A Nu 926.91 mn budget has been allocated for human resource development to various ministries. There is also separate budget for the governments various youth employment programs under the ESP and other vocational trainings. A Nu 119.36 mn budget has been kept for the promotion of sports.
The total budget allocation to local governments in Dzongkhags and Gewogs is Nu 2.79 bn.
The foreign currency outflow due to the budget is expected to be USD 151.19 mn.
In terms of a macro economic outlook a growth rate of 6.8 percent is predicted in 2014-15. Inflation is expected to be at 9.34 percent in 2014 and 8.44 percent in 2015 following the Indian inflation. The current account deficit is projected at 30 percent of GDP and trade deficit at 20 percent of GDP. Bhutan’s reserves are expected to increase to USD 1.17 bn in 2014-15.