Govt. plans to reduce fiscal deficit to below 5% by FY2022-23

The fiscal deficit for the FY 2022-23 is estimated at Nu 22,882.133mn, which is 11.25% of the GDP

The government has pegged the fiscal deficit for the Fiscal Year (FY) 2021-22 at 8.5% of the GDP and aims to bring it back below the 5% mark by 2022-23.

The fiscal deficit for the FY 2022-23 is estimated at Nu 22,882.133mn, which is 11.25% of the GDP.

Meanwhile, the fiscal deficit shot up to a high of 8.5% of the GDP due to the double impact of the COVID-19 pandemic, low revenue flows due to the lockdowns, and negative economic growth clubbed with high government spending to provide essential relief to vulnerable sections of the society, as well as stimulus package aimed at reviving domestic demand.

Finance Minister Namgay Tshering said the government’s fiscal policy continues to be sustainable and responsive to the challenges brought about by the pandemic to help the economy regain its growth momentum amid the expected negative growth in 2020.

“The fiscal policy for FY 2022-23 is designed to support economic recovery and gradually aims towards consolidation by enhancing domestic revenue mobilization and prioritizing expenditures,” Lyonpo said.

Considering the various initiatives under the economic recovery measures primarily underpinned, Lyonpo shared that with the fiscal, monetary, regulatory, and policy interventions, the fiscal outlook is expected to improve in the medium term.

“The government shall ensure to achieve and maintain the fiscal targets within sustainable levels,” Lyonpo said, adding that the FY 2022-23 budget aims to fulfill the fiscal objectives by containing a fiscal deficit below 5% during the FY 2022-23 to achieve the Mid-Term Review target of 5%.

In addition, minimizing the GDP growth of 4.5%, tax to the GDP ratio of at least 12%, recurrent expenditure to be covered by domestic revenue, and non-hydro debt maintained below 35% of GDP are also some of the objectives.

According to the budget report for the FY2022-23, the total resource is estimated at Nu 51,925.754mn, of which domestic revenue is estimated at Nu 36,368.270mn for the FY 2022-23. Within the domestic revenue, tax revenue constitutes 70% and non-tax revenue constitutes 30%.

“The tax revenue during the FY 2022-23 is expected to grow by 10% as compared to the FY 2021- 22,” the report states.

Meanwhile, the total expenditure for the FY 2022-23 is estimated at Nu 74,807.887mn, which constitutes 37% of the GDP. From the total expenditure, Nu 36,340.942mn is allocated for recurrent expenditure and Nu 38,466.945mn for capital expenditure.

With net lending of Nu 2,795.729mn, the net financing requirement amounts to Nu 20,086.404mn, which will be financed through net external borrowings of Nu 270.006mn and net internal borrowings of Nu 20,356.410mn.

Further, the total public debt stock is estimated at Nu 268,708.500mn for the FY 2022-23, which is 132.1% of the GDP.

As per the initial 12th FYP estimates, resources were estimated at Nu 280,772.642mn, out of which Nu 217,728.299mn was estimated as domestic revenue and Nu 63,044.343mn as grants. The total expenditure was estimated at Nu 310,016.072mn, out of which Nu 193,895.344mn pertains to recurrent expenditure and Nu 116,120.729mn for capital expenditure.

However, the fiscal deficit was estimated at Nu 29,243.430mn, which is 2.36% of the GDP.

Finance Minister Namgay Tshering shared that taking into consideration the financial performance as of the FY 2020-21 and the revised fiscal estimates for the FY 2021-22 and estimates for the FY 2022-23, the overall resources for the 12th FYP are estimated at Nu 268,547.196mn and the total expenditure is estimated at Nu 325,312.382mn. The fiscal deficit is Nu 57,648.838mn, which is 5.97% of the GDP.

“The overall fiscal deficit is estimated to increase from Nu 29,243.430mn to Nu 57,648.838mn by almost 97% from the initial 12th FYP estimates,” Lyonpo shared.

The minister added that the increase in fiscal deficit is on account of the impact of the pandemic on the domestic revenue collection and increased spending requirements related to the COVID-19 pandemic.

Kinley Yonten from Thimphu