Major financing headache ahead for some of PDP’s freebie pledges

At 138 pages the People’s Democratic Party (PDP) Manifesto was by far the longest and most detailed of the five competing political parties. By comparison the Opposition Bhutan Tendrel Party (BTP) which had the shortest manifesto, had only 63 pages.

At one level the PDP manifesto arose from experience in governance from 2013-2018 and the need of the times with an economy in the dumps, but at another level it was forged in the heat of competitive politics.

Freebies

While PDP won the elections with a convincing majority some of its ‘freebie pledges’ will come to haunt it again and again.

This was apparent in the recent meet-the-press interaction where questions came up on the Nu 10,000 per third child pledge and increasing the Rural Life Insurance from Nu 30,000 to Nu 150,000.

The Opposition Party and other political parties can be expected to point to these freebie pledges down the line.

Apart from the above two, a few other freebie pledges are to provide interest free loans to buy power tillers, tractors and other farm machinery; support one youth from a household (where no member of the household had gone abroad) to study and work in countries like Australia, the Middle East and Canada by providing concessionary education loans to pay tuition fees for the first semester; and provide loan at 4% interest rate for the first home or apartment purchase.

While not a freebie there are also expensive pledges like converting contract employees to para-regular positions with the same benefits as regular employees.

Show me the money

The big question is now how will PDP fulfil its freebie pledges given that none of them are a part of the Nu 512 billion (bn) 13th Plan.

For example, the Nu 10,000 for a third child is expected to cost Nu 6 bn in five years and increasing the Rural Life Insurance from Nu 30,000 to nu 150,000 is expected to cost Nu 3.261 bn in five years (see separate stories on pg 1).

Just these two main pledges will cost around Nu 9 bn which is not budgeted in the 13th plan.

This is not even taking into account how low interest loans will be given for studying abroad, buying a first home and interest free loan for farm machinery.

The 13th plan after all the grants and internal revenue still has a shortfall of Nu 59 bn.

Raising this itself will be a challenge without even addressing the freebie pledges.

The Finance Minister Lyonpo Lekey Dorji said the full costs and calculation of the pledges have not been fully worked out yet.

He said the focus at the moment is firefighting and managing the daily and monthly expenses.

He said this will continue until July 2024 when the first budget for the 13th Five Year plan is passed.

The minister said that most of PDP’s pledges in its manifesto has been incorporated into the 13th plan but certain pledges like Nu 10,000 for the third child and revising rural insurance is not within the plan. He said the fulfilment of these pledges depends on the financial situation.

The minister said the pledges are very ambitious and they will try and fulfil whatever is good for the country.

The minister said that the government can fulfil all pledges if it ignores the aim to keep the fiscal deficit at 3% and cut some plan programs and national projects, but they would also like to try other means to fulfil the pledges.

While members of the PDP party are Gung ho about fulfilling all the pledges those in government are coming to grips with a reality of limited resources and competing priorities.

A senior government figure said that it may not be possible for the government to fulfil all pledges 100% as there is already a resource gap and it would entail take huge non-hydro loans which is already high.

Another senior government figure said that the 13th plan is the aspiration of the people and it may not be wise to sacrifice it for the freebie pledges of PDP.

There is also discussion within the government on how money can be raised at all for such pledges and some are asking if it is even possible.

A senior civil servant said raising money for the pledges is the ‘million-dollar question.’ He said since the pledges would be a recurrent expenditure one cannot take direct cash from donors unless it is made into a program.

The official said one way would be to reduce wasteful expenditure and another way is reprioritization of activities in the plan.

There are also different views within the government on the pledges and tension between the political need to fulfil the pledges and the fiscal reality of limited resources.

A senior PDP member on the condition of anonymity said there were some internal reservations on some of the pledges being too ambitious when the manifesto was being drafted. 

However, a member of the PDP’s manifesto drafting committee who did not want to be identified and is currently out of the government said that all the pledges were thought through and put in the manifesto in good faith and with the best interest of the nation in mind.

He said the party would go all out to fulfil the manifesto and give a good try.

The committee member acknowledged that the other parties were also offering a lot and PDP also did the same and moreover all the pledges were approved by the expert committee under the Election Commission of Bhutan that reviewed the pledges.

He said if the pledges were unreasonable then the expert committee would have struck it down.

PM says pledges are doable

The Prime Minister Dasho Tshering Tobgay said, “When people say we are under pressure to fulfil pledges that is good. People expect us to fulfil our promises and that is good. Are we under pressure? Yes. Should we succumb to pressure in that should we just fulfil pledges without thinking them through carefully without preparing ourselves, without ensuring enough financing, without ensuring that the benefits which the pledges are supposed to provide, without being fully ready to realize those benefits – No.”

The PM said they need to be very deliberate and the case in point is Saturday off which was supposed to be on the first day and it would have been very easy, but the quality of education was at stake and so they took time and spent three months consulting a range of people and were able to take a decision just as they had promised, and that had nothing to do with pressure.

The PM said the pledges are not freebies as a freebie is giving something for free without it accruing any positive benefit for the country.

“All our promises, have a larger purpose to benefit and strengthen our country and maintain our security and sovereignty and to foster prosperity. Our pledges were very carefully thought out,” said the PM.

He said in life insurance Nu 30,000 is not enough for rural Bhutan and when it comes to cost they will look at it very carefully, because the pledge is for rural Bhutan and not urban Bhutan.

“So, we are already studying this. I can tell you that a back of an envelope calculation shows that there isn’t going to be too much of a change,” said the PM.

“On the third child, we are talking of a third baby and how much of us have one. I will be very happy if it is going to cost us a lot as we are maintaining our population. When you talk of a crisis this is as bad as it gets. Our population growth rate is plummeting and we are well below fertility rate and yet the most productive people are working abroad. They are not creating families,” he added.

The PM said the population growth rate is not sufficient enough to maintain the country and on the other hand those who can bear children are busy working and so the country should be ready for a rude awakening in the next 10 to 15 years.

“So therefore, even there I don’t see it as a freebie. It is to incentivise people to have a third child and beyond.”

The PM said on the question of what these pledges will cost  people will be surprised that it will not cost  that much money.

“Let us do our calculations and when we announce it in due time people will be surprised.”

The PM said that the one area which is going to cost a lot is power tillers as they want to be able to provide interest free loans for power tillers.

He said it is a loan and only the interest component will be subsidized by the government.

“It’s not going to cost the government tremendously, but on the other hand the farmer’s productivity increases commensurately in which case that little subsidy is justified for our country’s prosperity and our farmers’ prosperity.”

Lyonchhen said if most farmers want to avail of this facility it is going to strain the foreign currency reserves  and so what they are looking at is requesting the Government of Japan, since Bhutanese prefer Japanese power tillers, to look at the possibility of providing a concessional loan to Bhutan.

He said then the farmers can buy the power tillers using Japanese Yen provided in the form of concessionary loan so that it does not affect the foreign reserve. 

“Now the beauty is we want to bring it a whole circle and we want to take the farmer’s instalment not in cash but in kind. So especially in any kind or produce we can export to Japan so whether it is a particular type of mushroom or Quinoa or anything that we can export to Japan and we will earn Yen through those exports and Yen that will be used to pay back the loans. So, it is all about innovative financing schemes,” said the PM.

At the end of the day despite the optimism of the government and the Prime Minister the bill for the freebie pledges will be huge and it remains to be seen how the government can come up with the funds.

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