Presenting the overview report on the 12th Five Year Plan (FYP) to the first session of the third parliament, finance minister Namgay Tshering said that that the 12th FYP period has been moved to November 1, 2018 to October 31, 2023 in order to align with the term of the incoming government unlike past plans which commenced from July. And likewise, the future FYPs will also follow the incoming government’s tenure so that plan period will be aligned accordingly.
The fiscal projections, the finance minister said has been made based on the medium term economic outlook and the government will strive to achieve the target of maintaining average fiscal deficit below 3 percent and plans to cover 80 percent of the total expenditure by domestic revenue. The government also targets to maintain tax to GDP ratio at 12 percent, maintain budget variance below 3 percent and maintain non-hydro debt below 35 percent of GDP.
The resources envelop for the 12th FYP is estimated at Nu 280 bn, of which domestic revenue is Nu 217 bn and the grant is Nu 63 bn. According the plan, grant constitutes 22.5 percent of the total resources and will finance 54.3 percent of the capital expenditure. “The estimated revenue is expected to fully cover the current expenditure and finance at least 21 percent of capital expenditure,” said Lyonpo Namgay Tshering.
“As mentioned earlier, the fiscal deficit is estimated to be Nu 29 bn, which is 2.4 percent of GDP as planned by the government to maintain fiscal deficit within 3 percent of GDP,” said the finance minister. The fiscal deficit is expected to be financed through an estimated external borrowing of Nu 4 bn from ADB and World Bank on highly concessional terms.
“The remaining deficit of 25bn will be financed from domestic market through issuance of government bond and treasury bills. However, to relieve pressure on the domestic credit market, efforts will be made to access new external grant financing windows such as trust funds and green climate fund,” informed the finance minister to the house.
As per the projections, public debt by the end of the 12th FYP is expected to touch Nu 249 bn- which is about 87.6 percent of the estimated GDP. Of the total debt of Nu 249 bn, external debt is projected at Nu 215 bn (80 percent on hydro debt) which is about 75.9 percent of GDP. Hydropower debt will constitute 68.4 percent.
“With the expected commission of Mangdechhu and Nikachhu Hydropower Projects in the 12th FYP, the external debt stock is projected to decline,” said the finance minister.
The finance minister also said that another notable aspect of the 12th FYP is the flagship programs that are instituted mainly as an intervention to address high priority national issues that includes economic diversification, employment generation, drinking water, healthcare, and public services through coordinated multi-sectorial approach. The flagship programs that are in line, will have detailed blueprint with clear plan action, dedicated resources, clear plan of action and assignment of responsibilities to implementing agencies, added the finance minister.
The 12th FYP has also incorporated pledges of the other three political parties as some of the pledges were deemed to be of national importance and for the common good of the people.
The 12th plan, considered very important as it is the last plan before Bhutan graduates from the list of Least Developed Countries in 2023, the government’s key priorities over the five years are addressing the last mile challenges such as reaching the unreached, improving quality of health and education services, poverty reduction, narrowing the gaps between haves and haves not, and addressing the needs of the vulnerable group which includes the senior citizens, disabled persons, orphans among others.
Another key priority of the government in the coming years is to strengthen the economy through economic diversification, and youth employment generation. The government will also focus on preservation and promotion of culture and traditions, environment development, and strengthening good governance.
The government has also laid out the consolidation and maintenance of existing infrastructure and investing on softer aspects of developments such as human resources as one of the major priorities for the coming years.