The government will resort to issuing treasury bills to meet the resource gap of Nu 3.8B in the coming financial year, according to the 2010-11 budget report, the presentation of which began in the National Assembly yesterday.

The outlay is Nu 31.6B, whereas resources at hand, which includes domestic revenue, grants and other receipts, is Nu 26.8B.

To finance the shortfall, the report lists programme borrowings of Nu 1.1B and project tied borrowings of Nu 2.3B from the Asian development bank, Japan international cooperation agency, international fund for agricultural development (IFAD) and the World Bank (WB).

However, debt servicing on loans from the governments of India, Austria, Denmark and from ADB, IFAD and WB for the year is Nu 2.3B.

This leaves a resource gap of Nu 3.8B, which the government plans to borrow internally. Whether this happens would depend on “if the budgeted activities of the financial year get fully implemented as planned”, states the budget report.

“Governments normally have to resort to internal borrowing, because it isn’t possible to raise such kind of money quickly through external borrowings,” said a finance ministry official.

Borrowing internally would be from the financial institutions that at present have a lot of money lying idle.

Of concern, as stated in the budget report, is the trend of recurrent expenditure increasing faster than internal revenue, mainly because of more infrastructure developed over the years. The report estimates that, in the coming financial year, current expenditure is estimated to increase by 9.5 percent, but revenue would increase only by 2.9 percent.

Even from the total resources of Nu 26.7B domestic revenue through tax and non tax sources is Nu 15.8B, and the rest is made up of grants, with the government of India contributing Nu 8.1B.

Current expenditure in the new financial year is estimated at Nu 15.2B, a 9.5 percent increase from the previous year, mainly on account of full implementation of salary revision by merger of allowances in the pay scale, new appointments, enhanced allowances for dzongdas and gups and operating costs for newly created government departments. The provision for the RBP salary revision has also been included, according to the report.

Interest payments is estimated at Nu 1.8B, of which 83 percent is for Tala and Kurichu project loans. Subsidies are estimated at Nu 753M, of which a major portion is for Druk Air loans taken to buy its aircraft.

Capital expenditure is estimated at Nu 17.3B, with more than 80 percent financed through external grants and loans.

Budget estimates for dzongkhag and gewog combined for the 2010-11 financial year is Nu 8.04B, down from Nu 8.7B in the previous year. The drop is mainly in the capital expenses. These figures however do not reflect activities done in the gewogs by the central agencies.

Sectorwise, education gets 16 percent of the outlay, Nu 8.2B, followed by agriculture, Nu 3.5B and roads, Nu 4.4B. For loan repayments, the estimate is Nu 4.2B.  Source: Kuenselonline