Government unveils Performance-Driven Budget for 2025–26

While presenting the Annual Budget for the Fiscal Year 2025–2026, the Finance Minister said the budget was developed with the theme “Accelerating Prosperity and Social Transformation through Enterprise, Innovation, and Efficiency.”

The Finance Secretary added that this is a performance-based budget and noted that the fiscal deficit of the 2024-25 has now been reduced to 2.3%.

The total proposed budget appropriation for the fiscal year 2025–26 stands at a record Nu. 138,500.7 million.

Out of this, total expenditure is projected at Nu. 119,211.3 million, which includes Nu. 58,481.2 million for recurrent expenses and Nu. 60,730.1 million for capital spending.

An amount of Nu. 1,854 million is allocated for lending, and Nu. 17,425 million is earmarked for loan repayments.

As of May 5, 2025, the country’s foreign currency reserves are estimated at USD 862.9 million.

At the close of the 2023–24 fiscal year, gross international reserves stood at USD 625.4 million, enough to cover 16 months of essential imports.

For the fiscal year 2024–25, reserves are expected to rise to USD 991.1 million, which would cover 26 months of essential imports.

In the medium term, the overall reserve position is projected to strengthen, mainly due to increased convertible currency reserves and the implementation of measures to boost exports.

With total resources estimated at Nu. 97,772.6 million, the fiscal deficit is projected to be 6.2 percent of GDP. Of the resources domestic revenue makes up 72.1 percent, external grants contribute 26 percent, and the remaining 1.9 percent coming from other receipts.

This reflects a 17.2 percent increase compared to the revised resource estimate of Nu. 83,434.8 million for FY 2024–25.

The increase in resources is primarily attributed to higher external grants and better tax collection.

Domestic revenue for FY 2025–26 is projected at Nu. 70,462.1 million.

Revenue collection is expected to improve through fiscal reforms such as the implementation of the GST, which will replace the current Bhutan Sales Tax, along with strengthened tax administration.

In addition, increased dividends from state-owned enterprises (SOEs) and profit transfers from key hydropower projects are expected to further support the government’s fiscal position, creating a more reliable resource base for development needs.

External grants for FY 2025–26 are projected at Nu. 25,415.2 million. These include both project-tied and program grants from development partners.

Among these, the Government of India–Project Tied Assistance (GoI–PTA) remains the largest contributor, followed by the World Bank, ADB, and other partners.

As of March 31, 2025, the total public debt stood at Nu. 298,183.3 million, accounting for 99.1 percent of the estimated GDP for FY 2024–25.

This includes Nu. 277,085.2 million in external debt (92.1 percent of GDP) and Nu. 21,098.1 million in domestic debt (7 percent of GDP).

A large portion of the external debt was incurred for hydropower development, with 61.4 percent of external debt attributed to hydropower projects, and 38.6 percent to non-hydropower sectors.

As of the same date, Central Government Obligations (CGO) made up 35.8 percent of the total public debt and 35.5 percent of the estimated GDP.

According to the Public Debt Management Policy 2023, CGO debt must remain within 55 percent of GDP annually. The current level remains within this threshold.