NATIONAL BUDGET FINANCIAL YEAR 2016-17 MINISTRY OF FINANCE JUNE 2016 NATIONAL BUDGET FINANCIAL YEAR 2016-17 MINISTRY OF FINANCE JUNE 2016 TABLE OF CONTENTS INTRODUCTION .....................................................................................1 CHAPTER 1: FISCAL PERFORMANCE/OPERATION IN FY 2014-15......5 1.1. Overall financial position ............................................................................5 1.2. Expenditure ...................................................................................................6 1.3. Resources .......................................................................................................7 1.3.1 Domestic revenue ...............................................................................7 1.3.2 External grants ....................................................................................7 1.4. Government debt position ..........................................................................7 1.4.1. Domestic debt ....................................................................................8 1.4.2. External debt ......................................................................................8 CHAPTER 2: REVISED BUDGET OF FY 2015-16 ..................................9 2.1. Resources .......................................................................................................11 2.1.1. Domestic revenue estimates .............................................................11 2.1.2. External grants ...................................................................................13 2.2. Expenditure ...................................................................................................14 2.2.1. Current expenditure ..........................................................................14 2.2.2. Capital expenditure ...........................................................................15 2.3. Net lending ....................................................................................................15 2.4. Borrowing .....................................................................................................15 2.4.1. Debt and debt servicing ....................................................................16 CHAPTER 3: BUDGET ESTIMATES FOR FY 2016-17 ...........................17 3.1. Resources .......................................................................................................18 3.1.1. Domestic Revenue .............................................................................18 3.1.2. External Grants ..................................................................................20 3.2. Total Expenditure .........................................................................................20 3.2.1. Current expenditure ..........................................................................20 3.2.2. Capital expenditure ...........................................................................21 3.2.3 Subsidies, transfers and equities .......................................................21 NATIONAL BUDGET FINANCIAL YEAR 2016-17 i 3.2.4 Net-Lending ........................................................................................23 3.3. Financing .......................................................................................................24 3.3.1. External borrowing ............................................................................24 3.4. Public debt stock ..........................................................................................25 3.4.1. External debt stock ............................................................................25 3.4.2. Domestic debt stock ..........................................................................25 3.4.3. Debt servicing ....................................................................................26 3.5. Sector allocation ...........................................................................................28 3.5.1. Health sector .......................................................................................28 3.5.2. Education sector ................................................................................31 3.5.3. Renewable Natural Resources (RNR) sector ..................................35 3.5.4. Mining and Manufacturing Industries ...........................................39 3.5.5. Roads sector ........................................................................................44 3.5.6. Urban development, housing and public amenities sector ..........46 3.5.7. Communications sector ....................................................................49 3.5.8. Energy sector ......................................................................................51 3.5.9. Religion and Cultural services .........................................................52 3.5.10. Law and Order .................................................................................54 3.5.11. General public service .....................................................................56 3.5.12. General Reserve ...............................................................................58 3.5.13. Human resource development .......................................................59 3.5.14. Sports .................................................................................................60 3.5.15. Gender Responsive Budgeting .......................................................60 3.5.16. Local Government ...........................................................................61 3.5.17. Legislative, Judiciary and Constitutional Bodies .........................63 CHAPTER 4: TAX MEASURES ................................................................69 CHAPTER 5: MACROECONOMIC PERFORMANCE AND OUTLOOK ... 70 Part I: Recent Macroeconomic Developments .........................................70 1. Real Sector: ...................................................................................................70 ii NATIONAL BUDGET FINANCIAL YEAR 2016-17 2. External Sector: ............................................................................................76 3. Monetary Sector: ..........................................................................................79 Part II: Economic Outlook ........................................................................81 1. Real Sector: ...................................................................................................81 2. External Sector: ............................................................................................84 3. Fiscal sector ...................................................................................................86 CHAPTER 6: ROYAL MONETARY AUTHORITY ..................................99 CHAPTER 7: STATE OWNED ENTERPRISES .......................................101 CHAPTER 8: DRUK HOLDING AND INVESTMENTS (DHI) ..............108 CHAPTER 9: NATIONAL PENSION AND PROVIDENT FUND (NPPF) .......111 CHAPTER 10: TRUST FUNDS .................................................................114 10.1 Trust Funds ...................................................................................................114 10.1.1 Cultural Heritage Trust Fund ..........................................................114 10.1.2 Bhutan Trust Fund for Environment Conservation (BTFEC) ...115 10.1.3 Universal Service Fund for ICT ......................................................115 10.1.4 Bhutan Health Trust Fund (BHTF) ................................................116 10.2 Endowment Funds .......................................................................................116 CHAPTER 11: HYDROPOWER DEVELOPMENT IN BHUTAN ..........118 11.1 Current Situation ..........................................................................................118 11.2 Financing modality: .....................................................................................119 11.3 Financial Progress of on-going projects ....................................................120 11.4 Hydropower revenue ...................................................................................122 11.5 Up-coming hydroelectric projects .............................................................123 NATIONAL BUDGET FINANCIAL YEAR 2016-17 iii CHAPTER 12: FOREIGN DIRECT INVESTMENT (FDI) ......................125 CONCLUSION ..........................................................................................129 ANNEXURES ............................................................................................131 iv NATIONAL BUDGET FINANCIAL YEAR 2016-17 INTRODUCTION As mandated under Article 14(8) of the Constitution and Section 47 of the Public Finance (Amendment) Act 2012, the Ministry of Finance presents the Annual Budget Report for the Fiscal Year (FY) 2016-17. The Fire Male Monkey Year is an auspicious year for Bhutan as it marks the 10th anniversary of His Majesty’s glorious reign, the 400th anniversary of Zhabdrung Ngawang Namgyel’s arrival in Bhutan and the birth year of Guru Rinpoche. It is also a historic year for Bhutan as we celebrate the birth of His Royal Highness the Gyalsey Jigme Namgyal Wangchuck that ensures the continuity of the sacred legacy of the Wangchuck dynasty. The Government and the people are blessed with a precious gift by Their Majesties the King and the Gyaltsuen. Therefore, the Budget for FY 2016-17 is dedicated to commemorate these historic events and in fulfilling the aspirations