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Budget Report FY 2020-2021 (ENG)

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Budget Report FY 2020-2021 (ENG) “Under ordinary circumstances, we have always exercised extreme prudence and carefully weighed the costs and benefits of every expenditure, to ensure the most judicious use of our limited resources while constantly keeping the long-term interest of the nation at heart. However, the situation we are in today is extraordinary, and unlike any we have experienced thus far. We are confronted with a dangerous global pandemic of an unprecedented scale posing an imminent threat to our people. Therefore, building the resilience, confidence and security of our people must take greater priority over conserving our resources.” His Majesty the King, Address to the Nation, 10th April 2020 BUDGET FY 2020-21 HIGHLIGHTS ECONOMIC OUTLOOK • The economy is projected to improve from -1.1 to 0.97 percent. • The commissioning of MHP since 2019 has improved the goods and services balance as electricity exports significantly increased. • Current Account Deficit is projected to improve from 14.4 to 11.0 percent of GDP. • With various fiscal and monetary measures, it is expected to boost domestic demand and generate economic activities which will have a positive impact on growth. RESOURCES • COVID-19 pandemic to impact domestic revenue by 14 percent. • Total resources estimated at Nu. 53,822.073 million. • Domestic revenue estimated at Nu. 33,189.392 million. • Grants estimated at Nu. 20,142.848 million, expected to cover 56 percent of capital expenditure. • To ensure that the revenue targets are met, the MHP shall be maintained under profit transfer modality during the FY. EXPENDITURE • Total expenditure estimated at Nu. 69,151.122 million, 7 percent increase from the previous year. • Capital expenditure Nu. 36,251.122 million and current expenditure Nu. 32,900 million. • Deepen fiscal decentralization with the upscaling of Annual Grants to Dzongkhags and Thromdes besides Gewogs. • Introduction of Current Grant system of current budget allocation to the central agencies. • Flagship Programs (Health, Education, Water, CSI Development, Digital Drukyul, National Organic, Tourism, Waste and Stray Dog Management) amounting to Nu. 5,148.212 million. • Implement Economic Contingency Plan which includes improvement of about 1,447 km of Farm Roads with existing road connectivity. DEBT SITUATION AND OUTLOOK • Fiscal Deficit amounts to Nu. 15,329.049 million, 7.36 percent of GDP. • External borrowing of Nu. 4,032.120 million and Domestic borrowing of Nu. 13,604.622 million. • Debt servicing for the FY to be Nu. 5,652.056 million, of which interest payment is Nu. 2,027.697 million. • Public Debt stock as on 31st March 2020 stood at Nu. 192,962.920 million of which non- hydro debt stock is estimated to be Nu. 47,842.346 million. Macroeconomic Performance and Outlook KEY BUDGET 2019/20 2020/21 2021/22 2022/23 Percentage change STATISTICS Revised Estimates Projection Consumption -2.8 -8.8 7.4 8.7 FY 2020-21 Investment 8.6 -7.6 -1 -2.5 Exports 7.9 1.9 2.5 5.7 Imports -6.3 -11.5 -3.8 -4.1 rGDP Growth 2.7 3.1 5.7 6.5 CAB (% of GDP) -14.4 -11 -10.8 -9.2 RESOURCE FOR FY 2020-21 International Reserves (USD 1,050 1,080 1,074 1,112 (in Million Nu.) in Million) Resource (Estimates) 2020-21 GDP nominal (in Million Nu.) 192,353 208,199 229,952 259,638 Taxes on Income, 9,397.337 Profits and Capital Gains Summarized Fiscal Framework (in Million Nu.) CIT 6,922.443 2019/20 2020/21 2021/22 2022/23 Particulars BIT 921.700 Revised Budget Projection PIT 1,553.194 Total Resources 52,726.618 53,822.073 49,547.261 47,997.960 Taxes on Property 53.353 Total Expenditure 64,615.466 69,151.122 59,629.658 48,633.723 Taxes on Goods and 6,070.386 Fiscal Deficit -11,888.848 -15,329.049 -10,082.397 -635.764 Services FB % of GDP -6.18 -7.36 -4.38 -0.24 Sales Tax 3,938.849 Domestic Excise Duty 860.276 Green Tax 836.359 Financing and Debt Situation (in Million Nu.) 2019/20 2020/21 2021/22 2022/23 Taxes on International 560.364 Particulars Trade and Revised Budget Projection Transactions Financing 11,888.848 15,329.049 10,082.397 635.764 Customs Duty 560.364 Net Lending -559.580 -1,316.666 -3,736.377 -3,819.484 Other Taxes 4,488.163 Net External Borrowing 4,721.137 420.030 -4,253.771 -4,749.174 Royalty 4,394.713 Net Internal Borrowing 6,608.130 13,592.354 10,599.791 1,565.454 Other Revenue 12,619.344 Percent of GDP External Grants 20,142.848 Total Public Debt 111.2 103.9 97.9 102.6 GoI 16,502.423 Total External Debt 111.0 103.7 95.3 99.6 Expenditure Performance and Outlook (in Million Nu.) 2019/20 2020/21 2021/22 2022/23 Particulars Revised Budget Projection Total Expenditure 64,615.466 69,151.122 59,629.658 48,633.723 Current Expenditure 35,819.345 32,900.000 35,449.564 38,846.542 o/w Interest Payment 1,902.110 2,027.697 3,200.938 3,381.670 o/w Pay and Allowance 16,414.476 17,007.480 17,364.086 17,728.481 Capital Expenditure 28,796.121 36,251.122 24,180.094 9,787.181 o/w Building, Land & Structures 16,247.212 16,961.964 14,946.825 6,049.905 o/w Machinery and Equipment 2,236.263 3,108.019 1,558.664 630.888 Contents Introduction ...........................................................................................................1 Chapter 1 Economic Overview ......................................................................5 1.1 Global and Regional Overview .............................................................5 1.2 Domestic Growth and Outlook .............................................................5 Box-1 COVID-19 and Measures ...........................................................7 1.3 Sector Performance ...............................................................................13 Chapter 2 Fiscal Policy .................................................................................16 2.1 Fiscal Policy Statement ........................................................................16 2.2 Fiscal Policy Targets FY 2020-21 .........................................................16 2.3 Fiscal Performance ................................................................................18 2.4 Fiscal Framework ..................................................................................20 2.5 Annual Financial Statements for FY 2018-19: Audited ...................21 Chapter 3 Resource Performance and Outlook ..........................................22 3.1 Resource Performance in FY 2018-19 ................................................22 3.2 Revised Resource in FY 2019-20 .........................................................24 3.3 Resource Estimates for FY 2020-21 ....................................................26 3.3.1 Domestic Revenue .......................................................................27 3.3.2 Grants ............................................................................................28 3.4 Medium Term Resource Outlook .......................................................29 3.5 Tax Buoyancy for the medium term ...................................................31 Chapter 4 Expenditure .................................................................................32 4.1 Revised Budget for FY 2019-20 ...........................................................32 4.2 Comprehensive National Response to COVID-19 ...........................33 4.3 Supplementary Appropriations ...........................................................37 4.4 Budget Estimates for FY 2020-21 ........................................................38 4.5 Sector allocation ....................................................................................42 4.5.1 Health sector ...............................................................................42 4.5.2 Education sector.........................................................................43 4.5.3 Renewable Natural Resource (RNR) sector ...........................44 4.5.4 Mining and Manufacturing Industry ......................................45 4.5.5 Tourism .......................................................................................45 4.5.6 Vocational training and employment......................................45 4.5.7 Roads sector ................................................................................46 4.5.8 Urban development, housing and public amenities sector ..46 4.5.9 Communication sector .............................................................47 4.5.10 Energy sector ..............................................................................47 4.5.11 Religion and Cultural services .................................................48 4.5.12 Law and Order services .............................................................48 4.5.13 General Public Service ..............................................................48 4.5.14 Human Resource Development ...............................................49 4.5.15 Sports ...........................................................................................49 4.5.16 Local Governments ...................................................................49 4.5.17 Legislative, Judiciary and Constitutional Bodies National Assembly ....................................................................50 4.6 Transfers: Annual Grants, subsidies and equities .............................53 4.7 General Reserves ...................................................................................55 4.8 Flagship Programs .................................................................................56 4.9 Gender Responsive Budgeting ............................................................57 4.10 Budget Appropriation
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