National Budget Financial Year 2021-22
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NATIONAL BUDGET FINANCIAL YEAR 2021-22 MINISTRY OF FINANCE MAY 2021 Printed @ KUENSEL Corporation Ltd. “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. “COVIDWe are-19 confrontedwill cause great with disruptions a dangerous to the globalglobal economy, pandemic and ofBhutan an willunprecedented not be an exception. scale Theposing economic an imminent repercussions threat will tonot our just people.impact a selectTherefore, few sectors, building but each the and resilience, every one ofconfidence us. At such a time,and securitywe must exhibitof our thepeople strength must that take comes greater out of priorityour smallness, over conservingremain united our and resources.” support one another. During such exceptional circumstances, the Government will take the responsibility of alleviating any suffering to the people due to the virus.” His Majesty the King, Address to the Nation, 10th April 2020 BUDGET FY 2021-22 HIGHLIGHTS ECONOMIC OUTLOOK ❖ The economy experienced its largest contraction in 2020 triggered by the COVID-19 pandemic. ❖ Economic growth for FY 2021-22 is projected at 4.1 percent. ❖ Further, the Druk Gyalpo’s Relief Kidu in the form of income and interest payment support to affected individuals, along with fiscal and monetary measures effectively mitigated the adverse impact to a large extent. ❖ The FY 2021-22 Budget aims to ‘Ensure Sustained Economic Stability for a Resilient Recovery’. RESOURCES ❖ Total resources are estimated at Nu. 56,765.582 million, of which domestic revenue is Nu. 35,600 million, external grants are Nu. 20,525.311 million, and other receipts is Nu. 640.271 million. ❖ Domestic revenue is expected to grow by 7 percent during the fiscal year mainly on account of estimated growth from income taxes, followed by increased consumption taxes. ❖ Tax-to-GDP ratio is expected to improve from 10 to 11 percent during the fiscal year. ❖ To maintain adequate inflows of domestic revenue, the MHP shall be maintained under profit transfer modality during the FY. ❖ Stronger than expected tax buoyancy indicates efficient and better performance of tax revenues. EXPENDITURE ❖ Total expenditure is estimated at Nu. 73,919.335 million, which is 7 percent increase from the previous FY. ❖ Capital expenditure of Nu. 38,320.671 million, 33 percent of the 12FYP outlay- highest annual allocation during the plan period and recurrent expenditure of Nu. 35,598.664 million. MAJOR ACTIVITIES ❖ COVID-19 Response: The Government has earmarked a budget of Nu. 3,000 million to meet COVID-19 containment related expenses and support economic revival initiatives. ❖ Flagship programs: Health, Education, Water, CSI development, Digital Drukyul, National Organic, Tourism, Waste and Stray Management amounting to Nu. 3,064.769 million. ❖ Road Connectivity: Construction of 36 Chiwog Road amounting to Nu. 266.452 million, On-going Improvement of Farm Roads (GSB and drainage) amounting to Nu. 1,135. 527 million, Construction of 27 Farm Roads amounting to Nu. 157.010 million and Blacktopping of 22 Gewog Center Roads amounting to Nu. 1,257.075 million. ❖ Foreign Relations: Establishment of Royal Bhutanese Embassy (RBE) at Canberra, Australia amounting to Nu. 357.600 million. ❖ RNR: Training of 500 youths and grant support for Youth Enterprise Development Nu. 44.320 million, and Construction and Renovation of Irrigation Channels Nu. 515.893 million. ❖ Supply Chain Management: Construction of two warehouses and one cold storage amounting to Nu. 140.500 million and Construction of Pack Houses Nu. 37.500 million. ❖ Trade Facilitation: Development of dry ports at Pasakha, Nganglam and Gelephu amounting to Nu. 560.740 million, Development of POL Depot in Eastern and Central Bhutan Nu. 70 million, and Development of industrial parks at Jigmeling, Dhamdum, Pasakha, Bjemina and Motanga Nu. 531.272 million. ❖ Promoting Green and Sustainable Transport: Implementation of Electric Vehicle (EV) discount program and Construction and Installation of EV charging station Nu. 128.134 million. ❖ Education and Civil Service Reforms: Replication of Teachings and Learnings from The Royal Academy in 22 schools Nu. 50 million and Civil Service Reform Nu. 19 million. ❖ Employment Creation: Build Bhutan Project Nu. 416.578 million, Critical Skills Development and Youth Engagement for Livelihood and Leadership Program amounting to Nu. 175.042 million and On-going construction and expansion of TTIs at Thimphu and Samthang Nu. 226.244 million. DEBT SITUATION AND OUTLOOK ❖ Fiscal deficit is estimated at 8.59 percent of GDP in FY 2021-22 to support economic recovery besides responding to containment measures. ❖ Total public debt stands at Nu. 224,909.609 million at the end of March 2021, accounting for 120.5 percent of GDP. Of the total public debt stock Nu. 215,822.826 million is external debt and Nu. 9,086.783 million is domestic debt. ❖ Hydropower debt amounts to Nu. 160,035.778 million, constituting 74.2 percent of total external debt. ❖ The non-hydro debt is Nu. 55,787.048 million accounting for 29.9 percent of total external debt. KEY BUDGET Macroeconomic Performance and Outlook STATISTICS Year 2019 2020 2021 2022 2023 Percentage change Actual Estimate Projection FY 2021-22 Public Consumption 10.8 3.1 3.6 5.3 5.6 Private Consumption 10.2 -24 -12.9 12.7 12.2 Govt. Investment -31.2 26.2 63 -33.8 -72 RESOURCE ESTIMATE FOR Private Investment -12.3 -2.8 2.7 5.8 3.6 FY 2021-22 Exports of Goods and 1 -1.2 4.7 3.8 9.8 Nu. In Million Services Taxes on Imports of Goods and -10.1 -17.3 -5.1 0.9 -6.9 Income 9,650.366 Services &Profits Real GDP Growth 5.5 -6.3 4.2 3.9 6.3 CIT 7,089.897 BIT 1,022.903 Expenditure Performance and Outlook (Nu. In Million) PIT 1,537.565 2020/21 2021/22 2022/23 2023/24 Taxes on 36.202 Particulars Property Revised Estimate Projection Taxes on Goods Total 7,342.266 70,549.915 73,919.335 44,689.443 58,817.733 and Services Expenditure o/w Recurrent Sales Tax 5,187.921 32,788.824 35,598.664 36,323.562 40,437.998 Expenditure Domestic Excise o/w Capital 765.325 37,761.091 38,320.671 8,365.881 18,379.735 Duty Expenditure Green Tax 961.563 Taxes on Financing and Debt Situation (Nu. In Million) International 485.743 2020/21 2021/22 2022/23 2023/24 Trade and Particulars Revised Estimate Projection Transactions Financing 13,554.886 17,153.753 -776.102 -1,248.924 Customs Duty 485.743 Net Lending 52.299 -3,085.586 -3,279.327 -9,217.353 Net external Other Taxes 5,416.611 2,694.591 444.822 -2,762.260 -10,462.274 borrowing Royalty 5,234.388 Net internal 10,912.594 13,623.345 -1,293.169 -4.004 borrowing Other Revenue 11,515.203 Percent of GDP Total Public External Grants 20,525.311 Debt 124.73 124.95 130.86 117.08 Total External Internal Grants 640.271 Debt 120.94 119.44 125.87 113.69 Summarized Fiscal Framework (Nu. In Million) 2020/21 2021/22 2022/23 2023/24 Particulars Revised Estimate Projection Total Resources 56,995.029 56,765.582 45,465.545 60,066.657 Total Expenditure 70,549.915 73,919.335 44,689.443 58,817.733 Fiscal deficit -13,554.886 -17,153.753 776.102 1,248.924 FB % of GDP -7.26 -8.59 0.35 0.51 Contents Introduction ............................................................................................................ 1 Chapter 1 Economic Performance and Outlook................................................ 4 1.1 Overview ................................................................................................................... 4 1.2 Global and Regional Situation .................................................................................. 4 1.3 Domestic Growth and Outlook.................................................................................. 5 1.4 Sector Performance ................................................................................................. 14 1.5 Per Capita Income ................................................................................................... 17 1.6 Risk and Challenges ................................................................................................ 17 Chapter 2 Fiscal Policy ........................................................................................ 19 2.1 Overview ................................................................................................................. 19 2.2 Fiscal Policy Statement ........................................................................................... 19 2.3 Fiscal Policy Targets FY 2021-22 ........................................................................... 20 2.4 Fiscal Performance .................................................................................................. 22 Box Item 1: Fiscal Policy in Supporting the Economy ............................................. 25 2.5 Fiscal Outlook: FY 2021-22 .................................................................................... 26 2.6 Budget Policy and Fiscal Framework Statement (BPFFS) ..................................... 28 2.7 Annual Financial Statement for FY 2019-20: Audited ............................................ 29 Chapter 3 Resource Performance and Outlook ................................................ 30 3.1 Overview ................................................................................................................