Domestic revenue estimated at Nu 36,368mn in FY 2022-23

The domestic revenue forecast for the FY 2021-22 is revised down to Nu 34,367mn, mainly to account for the shortfall in profit transfer from the RMA by Nu 1bn

For the next Fiscal Year (FY) 2022-23, domestic revenue is estimated at Nu 36,368mn of which tax revenue constitutes 69% of Nu 24,932mn and non-tax revenue constitutes 31% of Nu 11,436mn.

This is according to the macroeconomic situation report of the Ministry of Finance (MoF).

However, the domestic revenue is Nu 35,600mn for the FY 2021- 22, with tax revenue accounting for 65% and non-tax revenue accounting for 35%, while the remaining is from external grants. The total resource is estimated at Nu 56,756.6mn as per the approved budget for the fiscal year.

The half-yearly collection of July-December last year amounted to Nu 17,742mn of 49.8% against the approved budget, which is 4.8% lower compared to the same period in the previous year.

Based on the second quarter report, the domestic revenue forecast for the FY 2021-22 is revised down to Nu 34,367mn, mainly to account for the shortfall in profit transfer from the Royal Monetary Authority (RMA) by Nu 1bn.

In addition, the tourism royalty of Nu 466.98mn is unlikely to be realized this FY as tourism is expected to resume in June 2022.

The revenue collections from both tax and non-tax sources have been accordingly revised down by 3.6% and 3.2%, respectively. As a result, an overall reduction of Nu 1.2bn will impact coverage of current expenditure during the FY, according to the report.

The report states that the total grants received as of December last year is Nu 9,030.7mn of 42% against the approved budget. Of which, Nu 1,650mn is received as a program grant and Nu 7,117.4mn as project-tied assistance.

The total budgetary grants for the FY 2021-22 is revised down from Nu 21,714.79mn to Nu 16,286mn on the assumption that only 75% is expected to realize this FY based on prior trends and half-yearly status.

For the next FY, a total budgetary grant of Nu 11,455mn is estimated, which is the balance of the revised committed grants for the 12th FYP, the report states.

Meanwhile, the highly uneven incidence of COVID infections, coupled with varied public health responses have alleviated the government expenditure.

Total expenditure outlay for the current FY as per the approved budget is Nu 73,919.3mn, of which capital expenditure is Nu 38,320.7mn and Nu 35,598.7mn is current expenditure.

The current expenditure is estimated to increase by 11.6% from the previous FY to provide for a mandatory increase in pay and allowances, LG election, and interest payment.

The report states that although the requirement for the current budget has increased due to emerging priorities, it has been rationalized and adjusted to maintain the estimated domestic revenue.

The capital expenditure allocated for the current FY is the highest annual allocation of the 12th FYP mainly to stimulate economic stability through resilient recovery.

Based on the second quarter report, the capital expenditure is revised upward to Nu 41,785.4mn with an increase of 9% against the approved budget. This is due to the incorporation of external funded projects amounting to Nu 3.2bn from the ABD, EU, Austria, UN, WHO, WB, and GFATM.

The total capital budget utilization at the end of December last year is Nu 10,557.2mn, accounting for 27.6% utilization against the total approved budget.

“Therefore, given the size of the capital expenditure, close monitoring of capital works needs to be carried out to ensure the capital budget is fully utilized for development projects,” the report stated.

Further, considering a likely shortfall scenario for domestic revenue, the fiscal deficit is estimated at 8.6% of the GDP, amounting to Nu 17,153mn in the FY 2021-22.

The report states that the fiscal deficit may need to be financed largely through domestic markets as the borrowing from external sources, mainly the multilateral development banks, which are highly concessional depends on the agreed Country Partnership Framework for a certain period.

However, with the incorporation of additional commitment from the development partners amounting to Nu 3.2bn, the fiscal deficit is expected to further elevate to 9.9% of the GDP.

The fiscal deficit is expected to be around 9.7%, it is estimated where capital budget utilization of 80% considering the setback of the current lockdown and also in keeping with the past trends.

Kinley Yonten from Thimphu