Budget outlay for FY 2022-23 estimated at Nu 70bn

The FY 2022-23 is the last year of the 12th FYP

With the growth of current expenditure outstripping the increase in domestic revenue, rationalization measures adopted in the Financial Year (FY) 2021-22 will be continued to ensure that it is maintained within the domestic revenue, according to the Ministry of Finance (MoF). 

However, the ministry, through a notification issued recently, stated that if the domestic revenue performance improves, the rationalization measures will be lifted immediately.

According to the MoF, the budget outlay for the FY 2022-23 is estimated at Nu 70bn, of which the recurrent budget is Nu 36bn and the capital budget is Nu 34bn.

While the resource envelope estimated for the FY 2022-23 is Nu 55bn, of which Nu 36bn is estimated from domestic revenue, which indeed is forecasted at the higher side, and Nu 18bn in the form of grants.

The FY 2022-23 is the last year of the 12th FYP and the budget is considering the effective containment COVID-19 measures including the successful vaccination coverage of more than 90% of the eligible population, the resource envelope has been determined based on the current states of economy, estimated domestic revenue, the balance of committed grants, the 12 FYP revised outlay, changing priority and the COVID-19 containment protocols.

Budgetary bodies have been notified to ensure that the priority is accorded for completing ongoing works for both government and external financing.

“No request for additional funds under the RGOB financing will be entertained during the FY unless matching savings are identified to meet the requirement.”

Agencies are also asked to propose priority activities based on the emerging government needs or policy shifts subject to the implementation plan and utilization capacity.

To ensure the capital budget, any new constructions, and major renovation of offices, staff quarters or residences gates, boundary walls, and fencing are to be de-prioritized and deferred.

The government has also notified workshops, seminars, training, new consultancy services under the RGoB financing to continue to be rationalized, and also the proposal for procurement of pool vehicles will be rationalized.

Meanwhile, based on the projected resources and expenditure, the fiscal deficit for the FY has been estimated at Nu 15.6bn, which is 7.54% of the GDP. The average fiscal deficit for the plan period is expected to be around 5% of the GDP and will be financed through concessional external and domestic borrowings.

With the discontinuation of the budget ceiling at the agency level from the FY 2021-22, the heads of ministries and agencies are encouraged to lead and engage closely in the budget preparation process for effective and efficient prioritization of programs and activities, allocation of resources, and greater accountability.

“The ongoing policy initiatives and other strategic priority programs are adequately captured and sufficiently funded,” states the MoF, adding that any insertion of new activities and other strategies priority programs after submission of the budget proposal shall be based on the approval and directives of the Lhengye Zhungtshog.

Further, in order to ensure that the scarce financial resources are effectively utilized with accountability, the annual budget is asked to be tied to results and outcomes as specified under the general guidelines.

On the macro-economic outlook, with the economy gaining momentum from the end of the first quarter of 2021 supported by successful vaccination and continued fiscal support, there has been improvement in industrial production and international trade, according to the MoF.

The economy in 2021 is projected to grow at 3.3%. However, the risk of new infections with the outbreak of the Omicron in the region may slow down the recovery than anticipated in the medium term impacting growth and government revenues.

Further, to ensure optimal allocation and utilization of the scarce public resources, all the budgetary bodies are required to submit the write-up of justification for each activity and sub-sub-activity.

As per the directives of the Cabinet, the Department of National Budget will carry out an impact assessment of the annual grants and review its guidelines accordingly.

Kinley Yonten from Thimphu