COUNTRY BACKGROUND - Gross National Happiness Commission

Economic Outlook
8
(b) major investments which are themselves net revenue generators to the government (notably hydel schemes
and the proposed Dungsum Cement Project during 7FYP).
7.17 The second category have traditionally been considered as "non-plan" projects, to proceed if funding can be
secured. This approach makes sense for several reasons:
- the projects are so large that their inclusion within a single capital expenditure target would distort
the entire programme;
- as long as they are genuinely self-liquidating (i.e. they can earn a commercial rate of return on
investment), the recurrent budget constraint which limits the capital expenditure which RGOB
should undertake does not apply to them;
- because of their commercial potential, such projects should be able to tap funding sources which
are not accessible to mainstream capital projects: competition for funding between Plan and non-
Plan projects is therefore limited.
7.18 Accordingly, the expenditure projections for 7FYP focus mainly on the target for recurrent plus Planproject
expenditure. Anticipated expenditures on non-Plan projects (and the funding that they require) are
identified separately. However, this does not imply that these projects are less important. The overall target for
(Plan Project) capital expenditure is Nu. 6980m for the 7FYP, ( in nominal prices) with a ratio of capital to
recurrent expenditure being 45:55 compared with 50:50 in the 6FYP. The distribution between capital and
recurrent funds is shown in Figure 7.3. Non-Plan projects amount to Nu.9,632m and include power projects and
the Dungsum Cement Plant. As already noted, this figure is separate from the main Plan targets, in the sense that
an increase/decrease in estimates for non-Plan projects need not affect the targets for Plan projects or for recurrent
expenditure, although it does affect the total external financing requirement.
Sectoral AllocationsSectoral Allocations
Figure 7.4
7.19 Figure 7.4 shows the allocation of the recurrent budget between the major sectors, while the distribution of
both capital and recurrent funds between the Departments is shown in more detail in Table 7.2. The social sector
includes health and education and as indicated in Figure 7.4, social services have been allocated 19.8% of the
recurrent budget. The recurrent budget for the social services sector will be increased substantially in the first year
of the Plan as shown in Figure 7. 2. The economic services sector has a higher share, however this includes
Departments such as Power and Roads, which are vital for economic development but also enable greater access to
social services and improve the quality of life. Other activities in the economic sector will be revenue generating,
including Power and Telecommunications, and will therefore be largely self financing.
7.20 In terms of total funds, the social services sector will receive 22.7%, increasing from 15% of the total
budget in the 6FYP. The economic services sector will receive 42%: the Ministry of Agriculture 17.3%; Ministry of
Trade and Industry 15.7% and the Ministry of Communications 9%. As noted already, the activities funded in the