Matter of interpretation of the Public Finance Act: Finance Minister

FM responds after the Opposition accused that a legal lapse has occurred in the implementation of the NCGS

In response to the letter that the Opposition Party submitted to Prime Minister Dasho Dr Lotay Tshering stating that the government had committed a serious legal lapse in the implementation of the National Credit Guarantee Scheme (NCGS) by guaranteeing loans to private entities from the Consolidated Fund thus violating the Constitution and the Public Finance Act, Finance Minister Namgay Tshering said it was a matter of interpretation of the Public Finance Act 2007, namely sections 15 and 132.

According to the Finance Minister, the Act clearly states that the government has the authority to mortgage public money from the Consolidated Fund to secure private loans.

โ€œThe NCGS is implemented in partnership with the Bank of Bhutan, Bhutan Development Bank, and the National CSI Development Bank. The government has signed the agreement with them and there is no point in stating whether it is lawful or not.โ€

Meanwhile, the Opposition has questioned on the legality of the government guarantee of loans to private entities through the NCGS.

According to the Opposition Leader, despite the NCGS being unlawful, it may lead to a huge loss of public money if the private beneficiary fails to pay back the debt. โ€œThe fund for the mortgage will be derived from the governmentโ€™s Consolidated Fund or the taxpayersโ€™ money,โ€ he said.

Meanwhile, Finance Minister added that the NCGS is not a new scheme because it was already initiated in 2003 and 2009, but had not proved successful.

The Lyonpo shared that the scheme was initiated in 2009 by the Ministry of Labor and Human Resources targeting the youth and unemployed; it was never a scheme to mortgage public money from the Consolidated Fund to secure private loans. โ€œDuring those days the agreement was signed with six financial institutions.โ€

The scheme was re-launched on October 5, 2020, to enhance access to financing. The NCGS is an intervention under which the government guarantees a portion of the loans availed for establishing a viable business entity.

However, the Opposition Party has made recommendations to the government stating that the government should discontinue placing the public money from the Consolidated Fund as a guarantee to private loans and work with the Royal Monetary Authority, banks and financial institutions to streamline the financial sector and improve domestic credit, especially reducing interest rates, to improve access to finance by the private sector.

The OL outlined that even to guarantee loans to public entities by the government; it requires a prior approval of Parliament through submission in the form of Money Bills in accordance with Section 46 of the Public Finance (Amendment) Act 2012.

The section states: โ€œA money or financial bill is a bill which contains only provisions dealing with all or any of the following matters: government spending that is, appropriation or payment of money out of the consolidated fund.โ€

The Oppositionโ€™s stance is that neither the Finance Minister nor the government has the authority to guarantee loans to private entities when even Parliament does not have the authority to do so.

Kinley Yonten from Thimphu