Current Revenue from government agencies also sees an upward trajectory
The total tax revenue collected for the fiscal year (FY) 2022-2023 was about Nu 31.46 Billion (B), an increase of 21.8% from the previous FY 2021-2022. The increase is mainly attributed with a higher mobilization of direct tax, indirect tax, and other taxes by about Nu 1.3B, Nu 1.9B and Nu 2.2B respectively.
According to a latest report from the Royal Monetary Authority (RMA), the rise in direct tax was primarily attributed mainly to the increase in the collection of corporate income tax (CIT), business income tax (BIT) and personal income tax (PIT), profit, and capital gains, amongst others.
Similarly, the increase in indirect taxes was attributed to the increase in taxes on international trade and transactions.
In addition, there was a notable growth of 22.2% which is about Nu 1.5B in the current revenues of the FY 2022-2023 from the government agencies. The increase in the revenue is mainly attributed to a 27.5% increase in the collection of administrative fees and charges, as well as 11% increase in the sale of goods and commodities compared to the previous FY.
On the contributions, the CIT, Goods and Services Tax (GST), followed by Royalty were the highest contributors to the total tax revenue comprising 33.3%, 29.1%, and 21.1% respectively during the review period.
The total budgetary resources for the FY 2022-2023 increased to about Nu 60.4B from about Nu 54.3B in FY 2021-2022, an increase of 11.2%. The increase is mainly attributed to a higher mobilization in domestic revenue and external grants. The domestic revenue in FY 2022-2023 stood at about Nu 44.8B, an increase of 14.9% from the FY 2021-2022.
Over the period, domestic revenue had been financing current expenditure as per the constitutional mandate. Of the total domestic revenue, 70.1% or Nu 31.4B accounts for tax revenue, while 29.8% or Nu 13.4B was sourced from non-tax revenue.
The improvement in domestic revenue during the review period is attributed with a broad based improvement in tax collection and current revenue from government agencies.
On government spending during this period, the largest spending in the capital expenditure was incurred in structures like roads and buildings, amounting to about Nu 24.3B or 71.9%. Other capital expenditure comprised of plant and equipment with 8.3%, followed by professional services and trainings with 6% and 5.9% each, capital grants and equity shares with 3.1% and disaster related expenditure with 0.4%, amongst others.
However, the total current expenditure stood at about Nu 35.4B in the FY 2022-2023, an increase of 2.9% from the previous FY 2021-2022. The increase is attributed mainly due to the increase in expenditures for medical benefits, retirement benefits, interest payments and maintenance of properties.
Among the major components of current expenditure, pay and allowances continue to remain the largest share at 48.7%, followed by interest payments at 11.4%, wherein the interest payment amounting to about Nu 4.03B was primarily on account of the rise in internal borrowing cost on the issuance of government bonds, Treasury Bills (T-bills), Ways and Means Advance (WMA) from the RMA.
The high attrition rate of the public servants during the FY 2022-2023 has also led to the increase in the retirement, and provident fund and pension, amounting to about Nu 1.13B and Nu 1.52B respectively.
However, the total capital expenditure has decreased by 2.6% which is about Nu 913.7 Million (M) in FY 2022-2023. Consequently, the capital expenditure stood at about Nu 33.79B.
On the fiscal front, according to the central bank, the government maintained a sustainable fiscal balance, aligning with the goals of promoting sustainable and inclusive growth in FY 2022-2023.
Out of the total budget outlay of about Nu 69.15B for the fiscal year, 51.2% was allocated to current expenditure, with the remaining dedicated to capital expenditure. The trajectory of fiscal policy is expected to be influenced by the challenges of debt overhang and contingent liabilities over the medium term, according to the central bank.
Meanwhile, a persistent trade deficit continues to pose challenges to Bhutan’s external sector. “However, a positive outlook is projected for the medium term, with the trade deficit expected to improve from 24.3% of gross domestic product (GDP) to 20.2% of GDP in FY 2023-2024.”
The positive outlook is associated to the commissioning of two new hydropower projects, coupled with anticipated growth in tourism and inward remittances, according to the central bank.
Additionally, positive capital and financial net flows, comprising of official grants, hydro-related, and concessional loans, are expected to increase by 5.2% in FY 2023-2024, which will be adequate to finance the current account deficit over the medium term.
Sherab Dorji from Thimphu