Fiscal deficit for FY2021-22 increases to Nu 17.32bn

This is Nu 168mn more than the original estimate

The fiscal deficit in absolute figures has increased to Nu 17.32bn from the original estimate of Nu 17.15bn due to the increase in external borrowings (project tied borrowings) amounting to Nu 168mn.

This is according to the second quarter of the Budget Performance Report 2021-22 for the time period July to December, 2021 released on December 31, 2021 by the Department of Budget.

The report states that government budget resources and expenditure have increased by 6% and 5% respectively.

The increase in resource is mainly due to the incorporation of Nu 3.29bn under the donor support for implementation of various programs and activities during the FY.

However, the fiscal balance as a percentage of the GDP (Nu 199, 654.659mn) has increased from 8.59% to 8.68% at the end of the second quarter due to an increase in external borrowings.

The performance of total resources stands at 40% against the revised estimates, which is lower compared to the last FY 2020-21, which was about 48% during the same period.

Similarly, the domestic resources’ performances stand at 50% against the revised estimates, which is also lower compared to the last FY, which was about 57% during the same quarter.

Among the resources, the Trade Support Facilitation Program (TSFP) has the highest realization at 69% followed by others with 60%. The domestic receipts (Tax and Non-tax) realization stands at 50%.

During the quarter, there is no change in the current expenditure in terms of percentage; however in absolute terms, there is a slight decrease of Nu 0.702mn.

On the other hand, the capital budget has increased by 9.04% as compared to the approved budget.

According to the report, the resources realized during the quarter was less than the release provided. The excess release against the actual resources realized indicates that the government has pre-financed some of the donor funded activities where the release has not been received yet from the donor partner.

“This is an interim measure that the government undertakes to meet the cash requirement indicated by the budgetary agencies in executing the donor funded activities,” states the report.

In additional, the expenditure reported is less as compared to the release provided. However, it is expected that a portion of release will be in the form of advances, which will be booked as expenditure when the bills are submitted for settlement.

The report states that the budgetary agencies are urged to submit a realistic release forecast to enhance sound cash management because some portion of the release can be construed as expenditure (those provided as advances), and there could still be some portions of the release, which is not used indicating cash lying idle in the LCs.

However, the year-on-year comparison of the fiscal performance for the 2nd quarter of the two FYs (2020-21 and 2021-22) shows that the total resources performance has decreased by 5% as compared to the last FY for the same period.

The expenditure performance has also increased by 36% when compared to the last FY of the same quarter due to increase in expenditure performances and decrease in the receipts (revenue and grants); the fiscal balance has increased by 136% as compared to the last FY for the same period which was financed through borrowings.

Further, with the successful completion of the Mid-Year Review of Budget and Annual Performance Agreements, the budgetary agencies are expected to pick up the implementation of activities to utilize the budget and meet the targets.

Thus, the expenditure performance is expected to improve from the succeeding quarters.

Meanwhile, in the financing position of government as of December 31, 2021, there is a total estimated borrowings of Nu 6.08bn from international lenders like ADB, World Bank, IFAD, and JICA in the form of program and project-tied borrowings.

Nu 2.34bn has been received by the end of the second quarter, which is around 39% of the total estimated while the amount received during the first quarter was just 1%.

The report states that in the beginning of the second quarter, the outstanding T-bills stands at Nu 17,000mn.

The government has issued T-bills worth of Nu 21,000mn to finance the resource gap which was determined by comparing the cash requirement submitted by the budgetary agencies against the actual cash available in the Government Consolidated Account. Further, the cash raised through issuance of T-bills was also used for redemption of the outstanding T-bills that was carried forward from the previous quarter. As such, during the second quarter, Nu 25,000mn worth of T-bills was redeemed leaving an outstanding T-bill of Nu 13,000mn at the end of the second quarter.

Kinley Yonten from Thimphu