The National Council’s Economic Affairs Committee (FAC) has expressed serious concerns about the underutilization of the capital budget and potential macroeconomic risks in its review of the Budget Appropriation Bill for Fiscal Year (FY) 2024-2025 and the Supplementary Budget Appropriation Bill for FY 2023-2024.
An analysis of past trends reveals that around 20% of the annual capital budget consistently goes unspent. This issue, also underscored by the Royal Audit Authority in its Annual Audit Report, points to concerns about the reliability and appropriateness of budget allocations.
For FY 2024-2025, the proposed capital budget is Nu. 38.344 billion, an increase of Nu. 9 billion from the previous year.
The Committee attributes this underutilization to a lack of sufficient human resources, worsened by high attrition rates among civil servants. This underutilization threatens the effective management of public finances.
According to the Debt Sustainability Analysis (DSA), a negative GDP growth shock could worsen the debt-to-GDP ratio to 109% or 110% in 2024, and to 115% or 116% in 2025.
The steady depreciation of the Ngultrum against the US Dollar, which has dropped by 17.3% from 2019 to 2023, further compounds these risks by increasing the burden on debt repayment.
The Committee urges the government to develop plans to address these risks through strong fiscal management, building fiscal buffers, adjusting debt management strategies, and creating mechanisms for swift economic responses.