Loan accessibility still an issue

EAC recommends improve the effectiveness of the Annual Budget Appropriation Bills for FY 2024-2025

The Economic Affairs Committee (EAC) of National Council presented its observations and proposed recommendations on the Budget Appropriation Bill for FY 2024-2025 and the Supplementary Budget Appropriation Bill for FY 2023-2024 to the House.

The committee chairman, Tshewang Rinchen said that Review of the past trends indicates that approximately 20% of the annual capital budget remains underutilized. “This concern was also highlighted by the Royal Audit Authority in its Annual Audit Report, emphasizing issues of reliability and reasonableness in budget allocation.”

The Committee noted that the proposed capital budget for FY 2024 – 2025 amounts to Nu 38,344.313 million, an increase of Nu 9 billion compared to the previous fiscal year. Of many reasons, the Committee is concerned that the budgeted activities may not be executed as planned, due to the lack of adequate human resources owing to high attrition of civil servants. Recognizing the importance of underutilization of the capital budget, the Committee believes this poses a risk to the credibility of effective public finance management in the country.

Based on the observation, the EAC put forward two recommendations to improve the effectiveness of the Annual Budget Appropriation Bills for FY 2024-2025.

They recommended deploying sufficient personnel and improving budget management to enhance utilization and credibility in public finance management.

The chairman said that the Bhutanese economy is vulnerable to a negative GDP growth shock, which could increase the present value of debt to GDP ratio to 109% or 110% if it occurs at a level of 1 or 2 Standard Deviations (SD). “If this shock were to occur in 2024, the ratio would be 108%, but would worsen to 115% or 116% in 2025.”

Additionally, the continued depreciation of the Ngultrum against the US Dollar poses a major risk, as most non-rupee external debt is denominated in USD, which could lead to an increasing burden on convertible currency debt servicing and repayment.

To address these challenges, the Committee recommended implementing strong fiscal management practices, including building reserves during economic upswings, adjusting debt strategies to mitigate currency risks, and swiftly responding to economic shocks with targeted policies.

While the House supported the recommendations put forward by the committee, additional submissions from members led the Committee to conduct further review. Regarding the Supplementary Budget Appropriation Bill for FY 2023-2024 for a sum of Nu 3,224.924 million, the House unanimously supported it.

The House will adopt the Budget Appropriation Bill for FY 2024-2025 and Supplementary Budget Appropriation Bill for FY 2023-2024, along with final recommendations, on 2 July.

By Nidup Lhamo, Thimphu