COUNTRY BACKGROUND - Gross National Happiness Commission

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Economic Outlook to increases in GDP will not be significant during the 7FYP. Exploitation of another of Bhutan's major natural resources, its forests, will proceed cautiously, to ensure that development is not environmentally damaging. While production is expected to increase in this sector, it is unlikely that the share of forestry in total GDP will expand significantly. There is also scope for continued growth of the agriculture and livestock sectors, mainly through improved productivity (see Chapter 17). 7.7 Because of the limitations described above, the sector which seems to have the greatest potential for rapid growth during 7FYP is manufacturing. Starting from a small base, manufacturing grew at over 15% p.a. during the 1980s. Because the base is still quite small, few large-scale projects could ensure continued rapid growth of the sector. As will be described in Chapter 18, the ferro-silicon plant and another proposed cement factory (Dungsum) are the largest investments foreseen in the sector. Growth of the smaller establishments within manufacturing will also be encouraged to increase income and employment opportunities for all the population throughout the country. Tourism is another significant potential foreign exchange earner. The Royal Government has opted for selective tourism to minimise the possible adverse impact on its culture and environment. The number of tourists has been limited to below a ceiling of 4,000 tourists a year. Recognising the potential of this sector, the Government has privatised the Bhutan Tourism Corporation and will encourage the tour companies to increase their marketing activities abroad to attract a higher number of tourists. Table 7.1 GDP Projections 1989-1997 7.8 1 shows the results of an exploratory GDP projection, in which an overall growth rate of just over 5% p.a. is achieved through continued rapid growth of the manufacturing sector, despite the decline in electricity sector growth. In this scenario, the share of manufacturing in GDP would almost double, to 13.2% by 1997, while the share of electricity would fall to 7.7% from 9.4%. There would be a continued slow decline in the relative importance of the natural resources sectors: the combined share of agriculture and forestry would fall from about 43% to 41% of the total. IV. Government Expenditure IV. Government Expenditure 2 SECTOR 1980-89 Growth 1989 GDP Average Growth p.a. 1997 GDP (1989 prices) SHARE OF GDP 1989 1997 Agriculture & Livestock 5.0% 1371.7 4.5% 1946.4 33.0% 30.9% Forestry 429.1 4.8% 626.3 10.3% 9.9% Mining 13.8% 35.7 7.4% 63.3 0.9% 1.0% Manufacturing 15.2% 302.5 13.4% 829.0 7.2% 13.2% Electricity 65.4% 391.0 2.7% 482.5 9.4% 7.7% Construction 4.7% 358.2 4.5% 509.4 8.6% 8.1% Trade, hotels, etc. 1.1% 268.8 2.4% 325.0 6.5% 5.2% Transport & Communication 12.9% 235.6 6.7% 396.8 5.7% 6.3% Financial Services 9.8% 306.9 5.4% 468.1 7.4% 7.4% Community services (Govt. admin & defence) 6.8% 525.1 4.9% 771.9 12.6% 12.2% (less imputed bank charges) -67 7.2% -117 -1.6% -1.9% GROSS DOMESTIC PRODUCT Source: Planning <strong>Commission</strong>. 7.5% 4157.6 5.3% 6301.7 100.0% 100.0%
Economic Outlook 7.9 This section explains RGOB expenditure patterns in the 6FYP and their implications for the 7FYP budget. The capital and recurrent budget projections for the 7FYP are also summarised, including sectoral allocations, and compared with revenue forecasts to indicate the likely Government deficits. Government Expenditure During 6FYPGovernment Expenditure During 6FYP 7.10 As indicated in Chapter 2, RGOB has been heavily reliant on external assistance, from India and from other donors, to bridge the gap between its expenditure and domestic revenues. During 6FYP, however, the degree of this dependence was substantially reduced, notably because of the additional domestic revenues from the Chhukha power plant. Other domestic revenues were less buoyant. The allocation of expenditures between sectors broadly followed the priorities set out in 6FYP. 7.11 However by the end of the 6FYP, several factors compelled the Government to implement severe budget restraint: increases in economic growth tapered off after the commissioning of the Chhukha Hydel project; there was a decline in aid receipts from India; Government expenditure was increasing rapidly leading to significant budget deficits; and a decline in Bhutan's rupee reserves resulted from domestic borrowing to finance Government deficits. Recurrent and Capital Budget Projections for the 7FYP Recurrent and Capital Budget Projections for the 7FYP 7.12 While the Government will be playing a less important role in productive activities, RGOB will continue to influence the development of the private sector economy as a whole, through the impact of public sector expenditures, taxation and borrowing, and through provision of services and substantial investments in infrastructure. Much of the Five Year Plan therefore focuses on the Government's own expenditure proposals. For the 7FYP, the Royal Government has adopted expenditure and revenue targets which it considers are consistent with a 5% p.a. rate of economic growth, in the sense both that they allow sufficient public investment to support such a rate of growth, and that the domestic revenue requirements of the programme could be supported by such a growing economy. 7.13 The aggregate expenditure projections have been based on the following considerations: (a) Provision of sufficient recurrent funds for the existing activities of Ministries and Departments. (b) The capital and recurrent budget requirements for new projects as submitted by all Ministries shown in the Project Profiles, in Volume II. These requirements were analyzed by the Planning <strong>Commission</strong> and compared with forecasts of economic growth, domestic revenues and donor funds to estimate the most appropriate levels for the aggregate capital and recurrent budgets. (c) Once the overall budget was agreed, Ministerial and Departmental budgets were fixed based on: sectoral priorities; implementation capacity, including the availability of skilled manpower, and the capacity of the construction sector; and the appropriate ratio of capital to recurrent costs, to avoid the build up of recurrent costs. (d) In keeping with the Royal Government's objective of achieving recurrent budget self-sufficiency, recurrent expenditures will be kept to the minimum required to provide for existing activities and the growth of priority sectors. (e) In order to ensure that increases in the recurrent budget are not driven by expansion of capital expenditure, it has been necessary to restrict capital expenditure growth. 7.14 Projections of annual recurrent and capital expenditures have been made for all Departments, to provide information on the funds required to implement all projects and programmes during the 7FYP. However, fiscal discipline will be maintained: if revenues fall short of requirements, expenditures will be curtailed in order to avoid unacceptable budget deficits. The situation will be reviewed and the expenditure projections revised, as part of the annual budget exercise described in Chapter 3. 3
Page 1 and 2: COUNTRY BACKGROUND I. Physical Char
Page 3 and 4: COUNTRY BACKGROUND Minerals The exa
Page 5 and 6: COUNTRY BACKGROUND Bhutan is the le
Page 7 and 8: COUNTRY BACKGROUND personnel polici
Page 9 and 10: CHAPTER 2 ECONOMIC PERFORMANCEECONO
Page 11 and 12: 2: Gross Domestic Product 1980 —
Page 13 and 14: Figure 2.2 Economic Performance IV.
Page 15 and 16: Table 2.4 Government Expenditures 1
Page 17 and 18: Table 2.5 Summary of RGOB Budgetary
Page 19 and 20: Figure 2.5 Economic Performance 2.2
Page 21 and 22: Economic Performance of Infant Mort
Page 23 and 24: Approach to Development · sustaina
Page 25 and 26: Approach to Development 3.19 The fo
Page 27 and 28: Environment and Sustainable Develop
Page 29 and 30: Environment and Sustainable Develop
Page 31 and 32: Women's Involvement in Development
Page 33 and 34: CHAPTER 6 PRIVATISATION AND PUBLIC
Page 35 and 36: unacceptably high inequalities of i
Page 37: CHAPTER 7 ECONOMIC OUTLOOKECONOMIC
Page 41 and 42: Table 7.2 Seventh Plan Outlay and S
Page 43 and 44: Figure 7.2 Figure 7.3 Capital Expen
Page 45 and 46: Economic Outlook economic sector wi
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Page 49 and 50: Financing GapFinancing Gap Table 7.
Page 51 and 52: Fiscal and Monetary Policy Table 8.
Page 53 and 54: Fiscal and Monetary Policy Strategy
Page 55 and 56: Fiscal and Monetary Policy Table 8.
Page 57 and 58: Fiscal and Monetary Policy TABLE 8.
Page 59 and 60: I. IntroductionI. Introduction CHAP
Page 61 and 62: Aid Policy 9.9 Sectoral Allocation
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Page 65 and 66: Aid Policy Aid and the Private Sect
Page 67 and 68: Culture and Religion Dratshangs and
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Page 77 and 78: Education 11.24 In 1986, the enrolm
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Joint and Public Sector IndustriesJ
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Table 12.5 Sectoral Training Funded
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Human Resource Development IV. Manp
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CHAPTER 13 HEALTH SERVICESHEALTH SE
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Table 13.2 Health Institutions July
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A. Objectives and Strategies in the
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Table 13.5 Goals for Children and W
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Health Services IV. Health Sector P
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Mother and Child Health (MCH)Mother
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TOTALS FOR Health 1992/93 1993/94 1
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Human Settlements Chhukha. Certifie
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Human Settlements Lack of Skilled M
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Human Settlements only a fraction -
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Human Settlements awareness of the
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CHAPTER 15 TRANSPORT SECTORTRANSPOR
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Table 15.2 Passenger Carriage by Dr
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Civil AviationCivil Aviation Transp
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Transport Sector 15.25 In the 7FYP,
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Transport Sector target for formati
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Transport Sector 11
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CHAPTER 16 COMMUNICATIONS SECTORCOM
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Table 16.1 Telephone Facilities 199
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A. Objectives for the 7FYPA. Object
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Communications Sector Dzongkhags -D
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TOTALS FOR Department of Post, Tele
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Renewable Natural Resources Table 1
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Renewable Natural Resources earning
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Renewable Natural Resources 17.27 T
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Renewable Natural Resources Table 1
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Renewable Natural Resources coopera
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Renewable Natural Resources Institu
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Renewable Natural Resources 17.67 A
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Renewable Natural Resources Wildlif
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Renewable Natural Resources TOTALS
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Chapter 18 MANUFACTURING AND TRADEM
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18.8 (see Chapter 19 on Mineral Dev
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Input supplyInput supply Manufactur
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Manufacturing and Trade Polythene P
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Manufacturing and Trade Formulation
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Manufacturing and Trade V. Financia
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Mineral Development Coal mining and
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Mineral Development Table 19.2 Esti
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Mineral Development be purchased: 3
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CHAPTER 20 ENERGY SECTORENERGY SECT
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Exports and ImportsExports and Impo
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Energy Sector 20.21 Most of the rur
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shortages. Energy Sector 20.34 Alte
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Energy Sector items will include pu
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COUNTRY BACKGROUND - Gross National Happiness Commission

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