TRANSLATION OF THE PROCEEDINGS AND RESOLUTIONS OF THE 74TH SESSION OF THE NATIONAL ASSEMBLY OF BHUTAN HELD FROM 28TH JUNE TO 19TH JULY, 1996. I. OPENING CEREMONY The 74th Session of the National Assembly began on the 12th day of the 5th month of the Male Fire Mouse Year corresponding to 28th June, 1996 with the performance of the auspicious ceremony of the Zhugdrel Phuntsum Tsogpai Tendrel. The Speaker of the National Assembly, Dasho Passang Dorji began his opening address by welcoming His Majesty the King, the representatives of the Central Dratshang and the Rabdeys, ministers and officials representing the government and the representatives of the people. He also welcomed the new people’s representatives and extended a special welcome to the three new women Chimis, Leki Pema from Drujaygang gewog under Dagana Dzongkhag, Tshering from Nubi gewog under Trongsa Dzongkhag and Karma Choeki from Nangkor and Zobel gewogs under Pemagatshel Dzongkhag, and congratulated them on being selected as representatives of the people of their respective gewogs. He said that they represented a growing trend where women were playing an increasingly important role in the decision-making process of the country. The Speaker said that with the blessings of the Guardian Deities, the far-sighted wisdom and leadership of His Majesty the King, and the good fortune of the people, Bhutan had remained an independent and stable nation throughout its history. Yet, even as the country made dramatic progress, there were some negative developments which threatened the security of the nation. He said that the agenda of the 74th session reflected the concerns of the people about the ngolop problem in the south, and urged the members to participate actively and frankly in the deliberations to find an early solution to the problem and to ensure that such a threat did not arise again. The Speaker called upon the clergy, government officials, officers and members of the service forces, and the people to harmonise their thoughts and actions, and work together with total loyalty and dedication to ensure the progress, prosperity and security of the nation. With these words, the Speaker formally opened the 74th Session of the National Assembly. II. DISTRIBUTION OF DRAFT CHATHRIMS/ACTS The following Draft Chathrims/Acts were distributed to the members of the National Assembly on 28th June, 1996. a) Chathrim for the Speaker of the National Assembly b) Amendment to the Marriage Act, 1980 c) Zhapto-Lemi Chathrim III. REVIEW OF THE 1995-96 BUDGET AND PRESENTATION OF 1996-97 BUDGET The Ministry of Finance distributed copies of its report on the 1995-96 Budget and the National Budget for the Financial Year 1996-97 to the members of the National Assembly, following which the Finance Minister made his presentation. The Finance Minister reported that the fourth year (1995-96) of the Seventh Five-Year Plan had witnessed a marked improvement in the performance of the economy, particularly in the balance of payments position. Inflation rate remained below 10% while growth rate was 7%. He also reported that despite the substantial increase in the cost of basic social services like health and education which are provided free of cost to the general public, the sound fiscal policy of the Royal Government had kept budgetary deficit below 2% of GDP. The Finance Minister informed the members that during the visit of His Majesty the King to India in March 1996, the decision on the 1,020 MW Tala Hydro Electric Power Project and the 1,500 tons per day Dungsum Cement Project which were pending for quite sometime, were finalised within a single day and the agreements signed with the Government of India. These two land-mark projects are expected to make a substantial financial contribution to the revenues of Bhutan. The Finance Minister also reported that in the light of unforeseen requirements and due to implementation of additional development programmes, the budget outlay for 1995-96 increased from Nu. 5,155.248m to Nu. 5,556.524m. The current expenditure increased by 6.6% to Nu. 1,995.025m while capital expenditure increased by 8.6% to Nu. 3,262.364m. Since the new fiscal year starts from July, and it is quite difficult to accurately forecast collection of domestic revenue and external aid disbursements, such changes between projections and actual expenditure is quite normal, he said. The increase in the 1995-96 budget outlay was only 7.8% . The Finance Minister reported that the increase in the outlay had been almost matched by positive developments on the resource side, and therefore, current expenditure and domestic revenue was balanced to a certain extent. Under external grants, increase had been reflected mainly due to incorporation of more accurate data during the year. External borrowings also increased on account of improved disbursement of existing loans. The increase in the disbursement of both grants and loans was the result of good project implementation and improved aid management by the Royal Government. The Finance Minister informed the members that the current expenditure outlay increased to Nu. 1,995.02m which exceeded the total domestic revenue receipts by Nu. 96.98m. Domestic revenue was therefore able to cover 95% of current expenditure. The increase in the current expenditure came mainly from employment of additional manpower, increase in the food subsidy to the monastic institutions and granting of Special Government Allowance to police personnel as had already been done in the case of civil servants. While every effort was made to control government expenditure, no additional taxes were levied during the 1995-96 fiscal year. The Finance Minister reported that the resource gap of Nu. 161.34m was filled by borrowing from the financial institutions. However, almost all of this borrowing was used to finance productive capital costs of projects. The budget deficit was contained at 2% of the GDP. The Finance Minister reported that the primary health and education projects in the six eastern Dzongkhags entered implementation stage during the fiscal year 1995-96. The renovation of Punakha Dzong as well as the flood protection works were also carried on as scheduled. The Thimphu and Phuentsholing Urban Sewerage and Water Supply Projects were completed. The 2.2 megawatt Rangjung Hydro Power Project was also completed and works on expansion of the distribution network in Trashigang and Trashiyangtse Dzongkhags were already in progress. The domestic telecommunication network had also been completed in twelve Dzongkhags, except for the western region where installation works were about to begin. Concluding the review of the past fiscal year, the Finance Minister requested the members to refer to the booklet distributed to them, for further details of the 1995-96 budget. On the national budget for the final year of the 7th Plan (1996-97), the Finance Minister reported that the year started on a positive note of sound economic development. The most important feature of the 1996-97 budget was the increase in the pay of civil servants, Gups and Chimis upon the royal command of His Majesty the King. Since the pay revision in 1988, there had been no increases in the salary till 1994 when the government, as an interim measure, sanctioned Nu. 500 per month to all civil servants. The effect of this increase in the salary of civil servants at the highest level was only 4% whereas it was as much as 56% at the lower levels which went a long way in alleviating the difficulties of the lower level civil servants. However, considering the increased cost of living and the consequent difficulties faced by civil servants in meeting even basic needs, His Majesty the King approved an increase in the salary of civil servants by 25% over the salary level of 1995-96. The actual increase in the salary of civil servants from this fiscal year compared to the 1988 level came to over 90% at the lowest level and 25% at the level of ministers. The Finance Minister also said that in view of their important role in promoting people’s participation and decentralisation, and acting as an important link between the government and the people, His Majesty the King approved an increase of 50% in the pay of Gups and Chimis. Likewise, the pay and allowances of the Royal Bhutan Police was also revised, resulting in an additional outlay of Nu. 30.27m in the Police Budget. The above mentioned pay increase would result in an additional budgetary outlay of Nu. 185m, representing an increase of 9.2% in the current expenditure budget. During 1994-95, when the civil servants were granted the Special Government Allowance, the Government also revised the wage rates for the national work force. The Royal Government further approved a 25% increase in the national wage rate during the current fiscal year. In the event the resource position improved, the Royal Government would consider further increase in the salary of civil servants in the near future. The Royal Government remained committed to the policy of having a compact, efficient and dedicated civil service for which it was necessary to pay the civil servants well. The Finance Minister informed the members that the total outlay for 1996-97 was Nu. 5,927.321, an increase of 6.7% over the revised 1995-96 outlay. Almost the entire increase in the current expenditure budget was on account of the salary increase and no significant increase was envisaged in the level of the normal current expenditure budget. However, it was hoped that the domestic receipt of Nu. 1,980.38m would be able to cover about 90% of the current expenditure. The Finance Minister reported that although in the beginning of the fiscal year it was difficult to forecast accurately the change projected in the level of external grants, external loan disbursement was, however, expected to rise by 26.75%.