ANNUAL FINANCIAL STATEMENTS of the ROYAL GOVERNMENT of BHUTAN for the YEAR ENDED 30 JUNE 2008 Department of Public Accounts Ministry of Finance Financial Statements of the Government of Bhutan for the Year Ended 30th June 2008 Table of Contents Contents Page No. 1. Introduction -------------------------------------------------------------------------------1 2. Overview ----------------------------------------------------------------------------------1 3. Receipts & Payments --------------------------------------------------------------------4 4. Operational Results ----------------------------------------------------------------------4 4.1 Expenditure growth ------------------------------------------------------------------4 4.1.1 Current Expenditure --------------------------------------------------------5 4.1.2 Interest Expenditure --------------------------------------------------------7 4.1.3 Capital Expenditure -------------------------------------------------------10 4.1.4 On-Lending -----------------------------------------------------------------10 4.1.5 Loan Repayment -----------------------------------------------------------11 4.1.6 Sector wise Expenditure---------------------------------------------------14 5. Financing ---------------------------------------------------------------------------------15 6. Government Receipt by Sources ------------------------------------------------------16 6.1 Internal Revenue -------------------------------------------------------------------17 6.2 External Grants---------------------------------------------------------------------18 6.3 Borrowings--------------------------------------------------------------------------18 6.3.1 Internal ----------------------------------------------------------------------19 6.3.2 External ---------------------------------------------------------------------19 6.4 Recovery of Loans ----------------------------------------------------------------19 6.5 Other Receipts & Payments ------------------------------------------------------19 7. Government Debt Position -------------------------------------------------------------20 8. Government Equity Holdings ---------------------------------------------------------25 9. Government Guarantees ----------------------------------------------------------------25 10. Government Consolidated Account --------------------------------------------------29 11. Government Budget Fund Account ---------------------------------------------------29 12. Refundable Deposit/Revolving and Trust Funds ------------------------------------31 Financial Statements of the Government of Bhutan for the Year Ended 30th June 2008 Table of Contents (Continued) TABLES: 1. Table 1: Variances between Budget & Outcomes ------------------------------3 2. Table 2: Consolidated Receipts & Payments Statement -----------------------4 3. Table 3: Total Expenditure---------------------------------------------------------5 4. Table 4: Current Expenditure & Internal Revenue Comparison --------------6 5. Table 5: Expenditure on Interest Payment---------------------------------------7 6. Table 6: Interest Payment on Loans - By Lender-------------------------------8 7. Table 7: Interest Payment on Loans – By RGoB & Corpn. -------------------9 8. Table 8: Capital & Repayment Expenditure comparison with Grants & Borrowings ---------------------------------------------------------------10 9. Table 9: Statement of On-Lending ----------------------------------------------11 10. Table 10: Repayment of Principal Loans – Summary--------------------------11 11. Table 11: Repayment of Principal Loans - By Lender ----------.--------------12 12. Table 12: Repayment of Principal Loans - By RGoB & Corpn.--------------13 13. Table 13: Summary of Expenditure by Sectors ---------------------------------14 14. Table 14: Fiscal Deficit/Surplus and its Financing -----------------------------15 15. Table 15: Government Receipt by Sources --------------------------------------16 16. Table 16: Summary of Revenue Collection--------------------------------------17 17. Table 17: International Assistances (Grants) received -------------------------18 18. Table 18: International Assistances (Loans) received--------------------------18 19. Table 19: Recovery of Loans for the FY 2005-06 & 2006-07 ----------------19 20. Table 20: Statement of Other Receipts & Payments----------------------------20 21. Table 21: Statement of Outstanding Loans – Summary -----------------------22 22. Table 22: Statement of Outstanding Loans – Detailed ------------------------23 23. Table 23: Statement of Government Equity Holdings--------------------------26 24. Table 24: Statement of Government Equity Holdings transferred to DHI---27 25. Table 25: Statement of Government Guarantees -------------------------------28 26. Table 26: Reconciliation of Govt. Consolidated Account ---------------------29 27. Table 27: Reconciliation of Govt. Budget Fund Account----------------------29 Annexure 1 - Credit as per Cashbook but not in BOB -------------30 Annexure 2 - Debit as per BoB but not in Cashbook --------------30 Annexure 3 - Credit as per BOB but not in Cashbook-------------31 SCHEDULES: 1. Schedule of Grants received by Donor ----------------------------------------- 32 2. Schedule of Loans received by Lender------------------------------------------54 3. Schedule of Revised budget and Actual Outcomes Comparison ------------55 4. Schedule of Expenditure Summary by Object Class --------------------------61 5. Schedule of Expenditure Summary by Function ------------------------------63 6. Schedule of Dishonoured Cheques ----------------------------------------------86 7. Schedule of Opening and Closing Cash Balances -----------------------------89 8. Schedule of Other Recoveries and Remittances -------------------------------90 9. Schedule of Miscellaneous Receipts and Payments --------------------------.91 10. Schedule of Revenue Receipts and Remittances ------------------------------.92 11. Schedule of Advances and Suspense --------------------------------------------93 12. Schedule of Non-Revenue Deposits -------------------------------------------.-94 13. Schedule of Current Deposit Accounts -----------------------------------------95 Financial Statements of the Government of Bhutan for the Year Ended 30th June 2008 1. INTRODUCTION The Annual Financial Statements (AFS) of the budgetary operation of the Royal Government of Bhutan (RGoB) for the Fiscal Year (FY) 2007-08 has been prepared as per the provision of the Public Finance Act 2007 (PFA-2007) and the Financial Rules and Regulations 2001 (FRR-2001) within six months after the closure of the FY. The statements and schedules presented in the AFS reflect the financial positions of RGoB for the FY ending 30th June 2008. 2. OVERVIEW The FY 2007-08 started with an approved budget of Nu. 24,287.520 million and a resource gap of Nu. 1,770.084 million. At the close of the FY, the revised budget was Nu. 27,014.825 million increasing the budget deficit1 to Nu. 2,826.030 million. However, the actual outcome for the FY was Nu. 20,919.770 million with a budget deficit of Nu. 915.656 million. This is 10% and 19% lower than the approved and the revised budgets respectively and represents around 37% of GDP for the FY 2007-20082. The comparison of approved & revised budget with that of actual outcome is presented in Table 1. The total realized resources of Nu. 18,316.908 million against a reported expenditure of Nu.17,913.359 million has resulted in a fiscal surplus3 of Nu. 403.549. However, during the FY the repayment of principal loans of Nu. 2,076.784 million exceeded the receipt of project-tied borrowing of Nu.757.579 million resulting in a budget deficit of Nu. 915.656 million as presented in Table 14. Of the total expenditure, recurrent expenditure of Nu. 9,725.719 million was fully covered by domestic revenues of Nu.12,345.984 million, fulfilling the provision of the PFA 2007 to meet the recurrent expenditures from internal resources. About 60% of the total capital expenditure of 9,967.310 million was covered by the grant assistance of Nu. 5,935.421 million. The increase in the total expenditure is about 34% as compared to the previous FY, which could be attributed to major activities such as, national elections, preparatory works for the centenary and coronation celebrations. The outstanding government debt as on June 30, 2008 amounted to Nu. 33,070.990 million equivalent to approximately USD 771.605 million. About 52% of total debt is in Rupee loan from Government of India (GOI) on account of the hydropower projects. The ratio of total debt to GDP is about 61 per cent. 1 budget deficit/surplus = (taxes + fees and income from property and enterprises + proceeds from sale of land and other capital assets + recovery of on-lendings + grants + project tied borrowings) – (current expenditures + capital expenditures + lending + repayments). Source: Budget Manual (BM), FRR-2001 2 GDP figure used is Nu. 53,932.800 million which is an average of Nu. 51,521.6 million actual for the year 2007 and Nu. 56,344 million projected for year 2008. Source: National Statistics Bureau (NSB). 3 fiscal deficit/surplus = (taxes + fees and income from property and enterprises + proceeds from sale of land and other capital assets + recovery of on-lendings + grants) – (current expenditures + capital expenditures + lending). Source: BM, FRR2001. - 1 - Financial Statements of the Government of Bhutan for the Year Ended 30th June 2008 The total Government Guarantees issued as