Government’s ever increasing consumption of limited resources

The Nu 213bn 11th plan is not only the largest plan for Bhutan, but it also reflects a trend of growing consumption of national resources by the government itself.

To illustrate this, of the Nu 213bn 11th plan around Nu 121bn or 57 percent is for current expenditure like salaries, DSA, entertainment, stipends, fuel, vehicle maintenance, etc. focused on some 24,856 civil servants. This is expected to go up even higher once the promised 20 percent hike is implemented.

By contrast, only around Nu 92bn or 47 percent of the plan is focused on capital expenditure or developmental works like roads, hospitals, and schools.

Given that Bhutan’s population is around 633,607 this would mean that around 3.9 percent of the population symbolized by the civil servants are directly or indirectly consuming around 60 percent of the Nu 213bn 11th plan by way of wages, benefits, DSA, training, fuel, internet and current expenditure.

In the 10th plan, 2008-2013, of the Nu 147bn outlay the current expenditure was Nu 75bn or 51 percent while capital expenditure was almost the same at Nu 73.2bn coming to around 49 percent.

Going back to the 9th plan from 2002-2007, of the total Nu 70bn total the current expenditure was Nu 31.682bn or 45 percent while the capital expenditure was higher at Nu 34.869bn coming to around 55 percent.

In short, the capital expenditure is more beneficial to ordinary citizens in a developing country in the long run as real and essential capital assets like motor roads, drinking water, etc. are created for citizens.

Current expenditure is the expense of the government in delivering these capital services and services in general.

If the current expenditure is much higher then it affects the essential capital services and also adds a heavy burden in running the government. It also consumes the vast majority of internal revenue as all current expenditure has to be financed from internal revenue of the government.

A prominent economist, on the condition of anonymity said, “One of the reasons why Bhutan suffered from a severe rupee and credit crunch is the growing current expenditure of the government, especially in terms of salary increases as Bhutanese people tend to not save or use the additional income to take bigger and new loans.”

He said that if the government is unable to control its current expenditure then Bhutan would take much longer to achieve national self-sufficiency, and still be dependent on foreign aid and the various conditions that come with such aid.

Over the last few years though the Budget Report was made a public document and presented in the Parliament, the Ministry of Finance stopped issuing the detailed current and capital expenditure heads in the public domain.

This paper was able to access the budget head for the 2013-2014 budget with the consent of the finance ministry.

The biggest chunk of the Nu 19.160bn current budget goes into the pay and allowances, emoluments, provident fund and retirement benefits of civil servants coming to a total of Nu 8.335bn or in other words 43.50 percent of the current budget.

This has more than doubled from the 2007-2008 budget where the total benefit for civil servants was Nu 3.799bn or 39 percent of the then Nu 9.725bn current budget.

In fact, going by the figures, the biggest reason in the dramatic increase of the current budget from 2007-2008 to 2013-2014 is the rise in salaries and related benefits for civil servants.

An economist said, “Prior to democracy, salary raises were given by the Royal Government only when there were enough resources and economic conditions dictated a rise. This kept the budget and expenditure realistic. Post 2008, there was numerous raises by the elected government even in the face of a global economic crisis and limited revenue partly due to economic reasons, but also due to political reasons to keep civil servants happy.”

He said that in the 2013 elections politics again saw political parties again promising another raise irrespective of economic realities and budgetary constraints.

A private sector manager said, “The constant increase in current expenditure and pay hikes have increased the income gap between the civil service and the larger private sector and also fuelled inflation making it even harder for the private sector and also the rural sector.”

He also said it was patently unfair for the government to continuously give such pay hikes to civil servants, especially when the bulk of the tax revenue from the private and corporate sector was used to pay for such hikes.

Another major part of the current expenditure is DSA or travel allowance for civil servants. In the 2013-14 budget, the in-country DSA is Nu 1.451bn while the out-country DSA is Nu 182.91 mn.

By contrast in the 2007-08 budget, the in-country DSA was Nu 1.096bn while the out country DSA was Nu just 78.6mn.

As per the 2013-2014 budget, Bhutan spends Nu 306.418mn in the maintenance of government vehicles under the current budget which include fuel and spare parts. There is also a separate Nu 76mn budget for transport and Nu 17mn for rental of vehicles under current expenditure. In spite of ministers foregoing their Prado vehicles, the government will still be buying Nu 217mn worth of vehicles under the capital budget.

There are already serious concerns and documented cases on the mass misuse of DSA by some civil servants using table-tours and also rampant misuse of pool vehicles by senior civil servants and fuel theft by drivers.

By contrast, even though national food self- sufficiency is the stated goal and the bulk of the population is engaged in farming, the 2013-2014 budget under the capital head has only allocated Nu 147mn for irrigation channels.

Though drinking water and sanitation is a major issue afflicting not only villages but also urban areas, the 2013-2014 budget has kept only Nu 642mn for it under capital expenditure.

In contrast, also under capital expenditure, the government will be spending Nu 801mn and Nu 502mn in human resource development and training programs respectively of mainly civil servants.

Under the capital budget, the government has kept Nu 68mn for livestock which is an important source of income for many farmers.

Under the current budget, the government has budgeted Nu 248mn in 2013-2014 for internet, telephones, fax and postage. Another figure under the current budget is Nu 248mn for office supplies and publication.

In both the categories, government employees have been found to misusing government resources e.g. by using the internet and telephone for entertainment or personal purposes.

Though there has been much hue and cry over advertisement budget, the government under the current budget has provisioned only Nu 56mn for advertising.

Contrast this with Nu 81.5mn for fuel wood or Nu 65.62mn for hospitality and entertainment.

Government meetings and events in the country also cost a pretty penny at Nu 301mn budgeted for the 2013-2014 budget under current expenditure. Contrast this with the rural life insurance scheme which is budgeted only at Nu 66mn.

The government, in addition to its many offices, is still the biggest tenant paying Nu 171.4mn a year in rentals for hiring buildings. It has a separate Nu 123mn for maintenance of buildings.

The government’s entire seedlings budget for farmers is Nu 45mn, but it spends Nu 72mn in just annual surveys and census.

In addition to the Nu 19.160bn current budget, the government also does not spare the Nu 16.953 bn capital budget for its operating expenses.

Some government-related expenses under the capital budget are Nu 123mn for furniture, office equipment of Nu 119mn and Nu 83mn for computers.

Though this government and the previous government had carried out various moves to bring down wasteful expenditure, the figures on the ground show a growing and bloated government over the years where the privileged few, in the form of civil servants, are consuming a disproportionate amount of government resources.

This is at the expense of the larger private sector whose taxes fund a lot of these expenses or the majority farming sector whose infrastructure needs are not adequately met.

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