The ministry will lift the rationalization measures if the domestic revenue performance improves.
With the increase in the current expenditure outstripping domestic revenue, rationalization measures adopted in the Financial Year (FY) 2021-22 will remain in place to ensure that the national expenditure is maintained within the domestic revenue.
According to the Ministry of Finance (MoF), the budget outlay for the FY 2022-23 is estimated at Nu 70bn, which comprises the recurrent budget of Nu 36bn and the capital budget of Nu 34bn. Of the Nu 55bn resource envelope estimated for the FY 2022-23, Nu 36bn is expected to be covered by the domestic revenue, while Nu 18bn will come in the form of grants.
The FY 2022-23 is the last year of the 12th Five Year Plan (FYP) and the budget has been allocated considering the ongoing pandemic crisis, especially for effective containment measures and successful vaccination coverage of more than 90% of the eligible population.
Further, the resource envelope has been determined based on the current state of the economy, estimated domestic revenue, the balance of committed grants, 12th FYP plan revised outlay, changing priority and the COVID-19 containment protocols.
Budgetary bodies have also been notified to ensure that the priority is accorded to completing the ongoing works for both government and external financing. No request for additional funds under government financing will be entertained during the financial year unless matching savings are identified to meet the requirement.
Meanwhile, agencies are asked to propose priority activities based on emerging government needs or policy shifts, and subject to the implementation plan and utilization capacity. To ensure that the capital budget is used judiciously, any new constructions, major renovation of offices, staff quarters or residence gates, boundary walls and fencing will be de-prioritized and deferred.
The government has notified that workshops, seminars, trainings, and new consultancy services under government financing will continue to be rationalized, besides procurement of pool vehicles.
Meanwhile, based on the projected resources and expenditure, the fiscal deficit for the financial year has been estimated at Nu 15.6bn, which is 7.54% of the GDP. The average fiscal deficit for the plan period is expected to be around 5% of the GDP and will be financed through external and domestic borrowings.
With the discontinuation of the budget ceiling at the agency level from the FY 2021-22, the heads of ministries and agencies are encouraged to lead and get closely involved in the budget preparation process for effective and efficient prioritization of programs and activities, allocation of resources, and greater accountability.
“The ongoing policy initiatives and other strategic priority programs are adequately captured and sufficiently funded,” states the letter from the ministry, adding any insertion of new activities and other strategic priority programs after submission of the budget proposal shall be based on the approval and directives of the Lhengye Zhungtshog.
Further, in order to ensure that the scarce financial resources are utilized with a profound sense of accountability, the annual budget would be tied to results and outcomes as specified under the general guidelines.
On the macro-economic outlook, with the economy gaining momentum from the end of the first quarter of 2021, aided by successful vaccination and continued fiscal support, there has been improvement in industrial production and international trade.
The economy in 2021 is projected to grow at 3.3%. However, the risk of new infections with the outbreaks of Omicron in the region may slow down the recovery than anticipated in the medium term, impacting growth and government revenues.
To ensure optimal allocation and utilization of the scarce public resources, all the budgetary bodies are necessitated to submit the write-up of justification for each activity.
As per the directives of the Cabinet, the Department of National Budget will carry out an impact assessment of the annual grants, and review its guidelines accordingly.
Kinley Yonten from Thimphu