Addressing a Nu 59 bn shortfall in the 13th plan

The draft 13th plan at the moment is Nu 512 billion (bn) and so far, the plans submitted by the ministries is taking the plan up to Nu 600 bn even.

However, this is expected to be rationalized and brought down to a more realistic figure in the coming weeks.

A challenge for the 13th plan drafters is that there is a Nu 59 bn shortfall outside domestic revenue and grants in terms of resources for the plan.

This is because of the Nu 512 bn draft 13th plan the domestic resources available are Nu 318 bn which are through various taxes, hydropower revenue, dividends etc.

This leaves a Nu 194 bn shortfall.

This shortfall will be lessened with the Nu 50 bn grants from various donors and institutions and another Nu 85 bn in grants from the Government of India which comes to a total of Nu 135 bn grant.

India’s grant for the 13th plan is Nu 85 bn with another Nu 15 bn as ESP support coming to a total of Nu 100 bn.

This Nu 135 bn grant for the 13th plan (not including the ESP) is already larger than the Nu 115 bn capital budget of the 12th plan.

So, Nu 194 bn minus the Nu 135 bn grant means a shortfall of Nu 59 bn.

The challenge for the government will now be to mobilize this Nu 59 bn and even more if the plan size expands above Nu 512 bn.

A senior official said that the resource mobilization is not over and there will be efforts to mobilize the shortfall.

One area will be unexplored grants in climate related financing and another will be impact investment through various foundations like Bhutan Foundation etc.

A new focus area will also be in seeking private investments in a major way.

A traditional measure will also be a combination of external and internal borrowings.

The Nu 59 bn shortage in the plan usually translates into fiscal deficits in the annual budgets as seen in the 12th plan.

The shortfall situation in some respects was much worse during the previous 12th plan.

The initial Nu 310 bn 12th plan started with a manageable shortfall or deficit of Nu 29 bn with a projected fiscal deficit of 3% for the entire plan.

However, COVID-19 struck from 2020 and the economy and revenue went into a tailspin.

It was clear in November 2021 itself that there was a huge drop in the projected revenue of the 12th plan by Nu 38.15 bn which combined with the earlier shortfall of Nu 29 bn lead to a fiscal deficit of Nu 67.15 bn in the 12th plan.

This fiscal deficit reduced slightly due to unspent money in some projects, however, accelerated spending in the 2022-2023 financial year budget and the bridging budget of 2023-2024 increased the 12th plan size to Nu 340 bn and also the fiscal deficit leading to increased external and internal borrowing. The fiscal deficit in the final year reached 9.7%.

The National Debt ballooned to Nu 280 bn by 2024 January including Nu 22.1 bn in government bonds reflected in the debt and Nu 9.8 bn in Treasury Bills which is not reflected in the national debt since it is short term borrowings of 91 days (see separate story on pg 1).

An official said that the Nu 59 bn shortfall is comparatively lesser as it is taken as a portion of the GDP which will be bigger under the 13th plan.

While this is true the problem for the government is a huge jump in non-hydro debt which stands at around Nu 94 bn as of January 2024.

This means the obligation to service this huge debt will fall on the current government making it riskier to take on additional non-hydro debt which is not self-liquidating like hydro debt.

Given the shortfall the cabinet will have to do two things. One is to reprioritize as per the resources available and the other is to come up with ways to meet the shortfall.

The government had made a request of Nu 100 bn for the 13th plan and Nu 15 bn for the ESP to the GoI.

Of this the GoI as announced by Prime Minister Narendra Modi gave Nu 85 bn for the 13th plan and Nu 15 bn for the ESP coming to a total of Nu 100 bn.

Here an official said that given the early signals from GoI the internal expectation was to only get Nu 70 bn for the 13th plan.

However, the visit of His Majesty The King followed by the visit of the Prime Minister Lyonchhen Dasho Tshering Tobgay led to that expectation being enhanced to Nu 85 bn apart from a separate Nu 15 for the ESP which the official said is a huge increase.

This is a 100% increase from the total Nu 50 bn given for the 12th plan (see separate story on pg 9).

Apart from the Nu 512 bn 13th plan the government has a separate target to raise Nu 310 bn for a series of planned hydropower projects that Bhutan is planning to do.

With the Nu 15 bn ESP being committed from India the next important step is the framework plan where there are plans to divert the funds in commercial farming, import substitution, tourism, Financial Institutions etc.

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