18/07/2025
The Ministry of Finance (M*F) acknowledges the post-session review on the annual budget presented by the Opposition Party following the deliberations of the 3rd Session of the Fourth Parliament. The M*F values such reviews as a vital part of our democratic process, fostering constructive dialogues and diverse viewpoints. However, some interpretations contained in the review warrant clarification to promote accurate public understanding.
𝟏. 𝐔𝐧𝐝𝐞𝐫𝐮𝐭𝐢𝐥𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐁𝐮𝐝𝐠𝐞𝐭 𝐟𝐨𝐫 𝐅𝐘 𝟐𝟎𝟐𝟒-𝟐𝟓:
i. During the deliberation on the Public Accounts Committee’s Audit Review Report for FY 2023-24 on July 2, 2025, the M*F through the Minister for Infrastructure and Transport reported to the Parliament that the capital budget utilisation for FY 2024-25 stands at approximately 80 percent.
ii. The estimated capital budget utilization including advances is around 85 percent (provisional expenditure: 80 percent, and advances: 5 percent), reflecting the government’s continued efforts to enhance the timely and effective implementation of capital projects.
iii. The budget utilization of 85 percent in FY 2024-25 is comparable to the first year of the previous plan periods as reflected below:
a. FY 2008-2009 : 65%
b. FY 2013-2014 : 86%
c. FY 2018-2019 : 80%
iv. As such, the capital budget underutilisation for FY 2024-25 at the close of the FY stands at 15 percent, whereas the 40 percent underutilization reported in the Press Release issued by the Opposition Party on July 16, 2025 is based on budget utilization till March 31, 2025.
2. As reported in the National Council by the Finance Minister during the Question Hour, the Royal Government has initiated several strategic measures to enhance the effective utilization of the capital budget for FY 2025–26. These measures include, among others:
i. The M*F in collaboration with the RCSC has incorporated mandatory financial indicators into the Performance Dashboards of Executives and P1 Chiefs in MAX System. All the budgetary agencies shall be required to achieve at least 90% utilization of the capital budget measured based on both physical and financial progress. This indicator is designed to promote responsible budget management and ensure financial performance towards the achievement of KPIs and target set for the FY.
ii. In accordance with the resolution of the Third Session of the Fourth Parliament to implement Performance-Based Budgeting as a measure to address the persistent underutilization of capital budgets and to enhance the effective use of allocated resources, budgetary agencies shall be mandated to revise and finalize the Annual Workplan for FY2025-26 based on the approved budget. This will serve as the basis for monitoring both the physical and financial progress of the agency’s Key Deliverables for the year. The results of this monitoring exercise will directly inform the determination of the RGoB budget ceiling and allocation in the subsequent financial years.
iii. To further strengthen annual planning and budgeting, the M*F has initiated the integration of the Annual Work Plan and Key Deliverables into the budget cycle, starting with the formulation of the FY 2025–26 budget. This approach will be continued for subsequent FYs to ensure that the annual budget is closely aligned with the Five-Year Plan priorities and grounded in realistic implementation capacity.
iv. To support timely implementation and completion of approved externally funded programs/activities, the M*F will continue to facilitate pre-financing for all ongoing programs/activities for which all formalities have been completed and awaiting funds disbursement by the development partners upon submission of the DPR, IPD and Financial Plan.
v. The revised Procurement Rules and Regulations 2025 and Standard Bidding Documents have come into effect from 1st July 2025. These updates aim to ensure economic and efficient use of public resources, achieve value for money and quality outcomes, reduce risk of fraud and corruption, and encourage greater flexibility and innovation. Notably, the tendering process has been streamlined and procurement timelines reduced by nearly 50% for faster turnaround time.
In support of this rollout, the M*F has almost completed carrying out a nationwide awareness program to strengthen procurement capacity and facilitate the smooth implementation of PRR, e-GP system, e-Tool, and GIMS. e-GP system is being revamped by Gov Tech Agency and DPP in partnership, to enhance greater automation and process efficiency in the tendering process. Annual procurement planning is mandatory and provided as a new chapter in the revised PRR and all tendering processes to be completed by end of the second quarter of the FY.
3. While it’s true that the government across the board has lost many experienced professionals, the adoption of a decentralized recruitment mechanism authorized by RCSC, particularly through time-bound project-based contracts has enabled budgetary agencies to effectively address human resource constraints as and when required.
This clarification is issued so that the public are not misinformed and burdened with unnecessary concern regarding the budget underutilization.
Sources: Ministry of Finance, Royal Government of Bhutan
