The Bhutanese government expects steady double-digit growth for the next three years—the period the Thinley government will remain in power. The annual budget presented at parliament last week has projected growth based on expanding construction such as hydropower projects. The projection has not taken into consideration the negative impact of inflation in India. The internal market is directly affected by India, and inflation has been taking its toll there.
As speculated by the G20 leaders, another wave of global economic downturn is expected shortly. This will fuel consumer prices in India and thus have a direct impact on Bhutan. Additionally, increasing food prices in India will affect Bhutan which relies heavily on India for its food supply. The food dependence on India will heighten in the coming years as the construction of over a dozen hydropower projects will further reduce the area of agricultural land in Bhutan. When completed, these mega power projects will raise the national growth rate much higher, as high as 27 percent. This does not represent balanced growth of the country, considering the fact that it will not bring any changes in the lives of the common Bhutanese.
The other contributing sector for growth would be tourism. But the government’s decision to extort heavy levies from foreigners visiting the country will discourage tourism, thus thwarting plans to host 100,000 visitors annually by 2010. Over-publicity of the north-hill-Drukpa tourism will make Bhutan less attractive to old visitors.
The government’s projection of creating more than 75,000 jobs seems like speculation. Construction of hydropower projects is expected to create some jobs for a temporary period. This will lessen the current unemployment rate of 4 percent to some extent for the next few years, but it will go beyond government control after that. As assumed by the government in the budget, service sectors like health care, tourism, agriculture, culture and education are not in a position to create new jobs. Finance, trade, manufacturing, mining and real estate would give some respite. As such, all these factors would drag the country’s growth rate down to a single digit.
The growth rate will not diminish the resource gap as current expenditure increases faster than development expenditure and as Bhutan grows to become more donor-driven. The resource gap remains at almost 12 percent even with donors contributing a third of the total budget outlay. This will result in a rise in external debt. Total debt for the new fiscal year is estimated at 62 percent of GDP. In the next two years, it is expected to rise to 64.7 percent and 67.8 percent. Further, the government plans to issue treasury bills this year, thus creating internal debt as well.
Utilisation of all domestic revenue in current expenditure means Bhutan will have to completely depend on donors for development activities. Continuing lobbying by parliamentarians and government employees will increase the ceiling of current expenditure.
Increasing investment in social sectors like education and health is worth mentioning. This is expected to meet the needs of the people in the southern districts where health units and schools remained closed for almost two decades. However, the inability of the government to provide non-formal education for those who failed to attend school during this period will plague the country with illiteracy.
The government has allocated a tangible amount for the anti-corruption campaign. The Anti-Corruption Commission not only needs more funds for expanding human resources but also expertise to control the increasing level of corruption in the country. The commission is unlikely to make any new effort to minimise corruption due to shortage of funds. The commission needs to expand its network to the regional level, if not the district level, to work effectively.
As usual, the government has not set aside anything for the Royal Bhutan Army or the Royal Palace. It’s a tricky business, and the common Bhutanese do not know how the expenditures in these two areas are met. While it has been clear since last year that the government of India pays for all the army’s expenses, where the money comes from for the royal household’s expenses have not been made public.
If the government does not allocate a budget for the royal palace, sufficient grounds are left for suspicion that the royal family thrives on money collected in the Kidu fund. Most of the welfare programmes that the government runs, including emergency donations, are operated through money donated into the Kidu fund that is directly controlled by the king. It is not under the jurisdiction of the Royal Audit Authority. But if the royal family lives with government funding, the citizens of Bhutan must have the right to know what portion of the taxes they pay goes for feeding the royals. The answer remains hidden.
Not all the plans announced last year were implemented. New and attractive programmes are announced to fulfil the people’s expectations as promised during the general elections in 2008, but whether they are implemented or not is something else. Looking through this lens, expecting a higher growth rate is another instrument for gaining popularity for the sake of popularity. Real growth remains in the ditch.
(The author is president of the Association of Press Freedom Activists, Bhutan)