The 2021-2022 budget had predicted an annual domestic revenue of Nu 35 bn but as of mid April 2022 the government has only collected Nu 23.6 bn in revenue and is still Nu 12 bn short with just two months left until the budget year ends in June 30 2022.
The Prime Minister Dasho Dr Lotay Tshering said, “We are very tight,” talking about the revenue situation.
He said there is another two months to collect this large amount but the situation is tight as all PIT, BIT and CIT has come down.
Lyonchhen said that one way to recoup is that the peak production of hydropower is in the next four months of which two months would fall before June end. The actual money for hydropower only comes in once a year but the revenue generated at this time will be reflected in the calculation of the domestic revenue figures.
Lyonchhen said the government is trying to save through travel expenses and asking agencies to be prudent with their money.
The government had forecast a revenue of Nu 2 bn from RMA but the Central Bank could only transfer Nu 500 mn leaving a shortfall of Nu 1.5 bn.
Then another projection gone wrong was that tourism would start early this year (before Omicron) and Nu 500 mn was projected in tourism revenue which is also not coming.
This means a total shortfall of already Nu 2 bn in revenue from the projected Nu 35 bn.
This comes in the backdrop of the Finance Minister Namgay Tshering announcing that the Performance Based Variable Incentive (PBVI) for SOEs is being put on hold as of 2021. Lyonpo said that the PBVI is based on the principles of profit and performance but he said when it comes to profit only Duty Free Bhutan and Bhutan Lottery are making profits and most of the rest depend on the government for subsidies.
He said the PBVI is from outside the Nu 35 bn revenue target which is to meet only mandatory and controllable expenses.
With just two months to go the Finance Minister assured that they will be able to collect the entire 35 bn. He said one reason for the delayed collection is due to the extensions given for PIT, BIT and CIT filing due to the lockdowns at the beginning of the year.
Lyonpo said on top of that the MoF is yet to get dividends from DHI which is currently being discussed.
Lyonpo said that the sales tax collection is also expected to improve this year since everything is routed through the MDP and so there is less chance of leakage.
The Nu 35 bn domestic revenue is absolutely crucial as the government has to meet all current expenditure from this which includes salaries, travel, maintenance, running offices etc.
When asked if the MoF has a back up plan Lyonpo said that one option is getting higher dividends from DHI and then the money that DHI needs for investments can be secured from outside, however, Lyonpo said that this would not be required.
He said the government in line with the announcement during the budget presentation is already rationalizing expenditure with block grants to agencies, postponing monetization of vehicle quota and pausing indexation of salary.
In terms of the major activities in the upcoming budget the minister said that the focus would be more on those activities that would not drain the foreign reserves or impact the balance of payment. He said these are like GSB for farm roads where most materials are inside the country or skilling programs.
Lyonpo said that even if Bhutan borrows for projects it will only be in those productive investments which will generate returns.