The Bhutanese Leading the way.
The 2024-25 annual budget allocated Nu 38.344 billion (bn) in capital budget, but many have been questioning the impact on the ground with not much visible major works and limited economic impact on the economy, which is primarily driven by government expenditure.
Some have even been theorizing a resource or revenue shortage, but the real reason is systemic inefficiency in planning for and spending the money, which means that as of May only around 60% of this amount has been spent.
At the current rate, only around 70% of the capital budget maybe spent towards the end of the financial year in 30 June 2025 when it should ideally be around 100%.
The underspending of the capital budget is not a new problem and has been an issue over several financial years and governments. However, this time around, the problem seems to be bigger due to a bigger capital budget combined with a high attrition rate that has seen many seasoned people across government agencies migrating to Australia.
The Economic Affairs Committee of the National Council last year noted that in the past the average rate of unspent capital budget is around 20%.
On 19 February 2025 the Finance Minister, Lekey Dorji, was so concerned with the rate of underspending after a mid-year budget review that he issued a letter to all ministries, government agencies and dzongkhags saying that as of 31 December 2024 the overall capital budget utilization was only around 18%. It was 23% for RGoB funded projects and 13% for externally funded programs.
The Finance Minister had said that such underspending reflects weak budget planning and execution, as a result of inadequate needs assessment and project planning, ineffective monitoring of project milestones and contractors or implementing agencies.
The letter said such delays has a financial cost, in terms of costs arising from internal and external borrowings.
What the Finance Minister did not mention in the letter is that the grants from donor agencies are only issued based on spending capacity, and this would be affecting that too.
The letter called on the heads of agencies to ensure speedier spending, and it did have an impact as the very low 18% spend in December improved to around 60% today, however, things could still be better.
An official said that the issue is not the resources, as some people speculate, but the issue is the spending across agencies due to systemic issues like lack of planning and capacity gaps. The official said to enhance implementation capacity there needs to be disciplined planning and better preparation.
The official said that, currently, agencies only start planning once they get the budget which is by June end and that eats up months in planning and preparation.
Giving an example, the official said one area of big capital spending is roads and bridges, and actually technical things like surveys, geo technical studies, etc., can be done ahead of time but are only done when the budget is actually released which eats up months.
To address this issue, the Ministry of Finance is looking at issuing preparatory works budget in advance so that agencies can at least start the preparatory works in advance, like surveys, etc., so that when the main budget comes the construction can start straightaway.
In the past, some officials have blamed the lengthy procurement and tendering process for the delays too, but the official said while it could have caused some of the delay it is also a part of the planning process.
“While you cannot tender out without the budget, the preparation of the tender document is a long process and people start planning only after the budget,” said the official.
